States with no income taxes and states with low property taxes
Investment in Real Estate and Property Tax Rates
In the United States, property tax is assessed by the local government at the municipal or county level. The property tax assessment is based on two values: the value of the land and the value of the building. Since the property tax is calculated locally, and since changes occur frequently, it is difficult to determine the exact places where the property tax is lowest. However, the following information should help you locate areas with high appreciation AND low property taxes.
What states have the lowest property tax rates?
County tax rates are often averaged into a single figure, and this number is used when comparing property taxes between states. Surprisingly, Wyoming has the lowest property tax rates. Unfortunately, property values in Wyoming tend to be quite depressed due to low population influx and lack of jobs. Additionally, Wyoming does not rank high when it comes to appreciation rates for residential and commercial real estate. Just because an area has low property taxes doesn’t mean it will be the best area to invest in (or move to).
What to look for when investing
Look for an area that has a consistent rate of real estate appreciation, combined with fairly low property taxes. Local property tax rates are often low because real estate appreciation in the area is low, so be careful. Cities located next to universities and areas where businesses are relocating are often great places to buy real estate. Paying attention to population growth can help you spot real estate trends and make smart investments.
Medium-sized cities with the lowest property tax rates
According to data compiled by the Office of the CFO in Washington, DC, the following cities have the lowest property tax rates in 2006, based on an annual income of $75,000. Assuming you make $75,000 a year, these are the property tax amounts you would pay in each city…
Birmingham AL — $988
Cheyenne WY — $1,108
Phoenix, Arizona — $1,248
Wichita Kansas — $1,309
Denver Colorado — $1,362
Charleston West Virginia — $1,395
Oklahoma City OK — $1,538
Kansas City, MO — $1,595
Little Rock Arkansas — $1,648
Louisville, KY — $1,713
Jacksonville FL — $1,744
Honolulu Hello — $1,781
TM Billing — $1,864
Salt Lake City, UT — $1,904
Virginia Beach Virginia — $1,918
Jackson MS — $1,971
Charlotte, North Carolina — $2,021
Boise, ID — $2,176
Columbia South Carolina — $2,214
Las Vegas NV — $2,225
Sioux Falls SD — $2,228
New Orleans, LA — $2,231
Wilmington DE — $2,416
Memphis, Tennessee — $2,501
Albuquerque New Mexico — $2,517
Houston, Texas — $2,861
The connection between state income taxes and property tax rates
States that do not have income taxes (see list below) generally have high property tax rates in their respective counties (The state needs to get its revenue from somewhere!). However, the trade-off is that you will have zero taxes on all income earned. This can be a great advantage. Instead of paying the state 7 to 15 percent (or more) of your income, you can keep your hard-earned money and invest it again in real estate or other investments. There are currently nine states that do not tax income at the state level.
States without income tax
Alaska
Florida
Snowfall
South Dakota
Texas
Washington
Wyoming
New Hampshire*
Tennessee*
*New Hampshire and Tennessee do not tax earned income, but they DO tax capital gains (dividend and interest income).
How to Find the Best of Both Worlds: Low Property Tax and No State Income Tax
If you are looking for the best of both worlds (low property taxes and no state income tax), you may want to consider the following cities:
Sioux Falls, South Dakota
Houston, TX
Jacksonville, Florida
Memphis, TN
Cheyenne, WY
The Vegas, Nevada
You can also explore lesser-known cities in the nine “no income tax” states. Smaller towns and cities generally offer “quality of life” advantages and above-average price appreciation and growth.
Conclution
Now you know which states don’t tax income and which areas have the lowest property tax rates. Armed with this knowledge, you can focus on finding the best place for your next home or real estate investment.