In order to keep a reverse mortgage loan in good standing, a borrower has to maintain the property to the standards of the Federal Housing Administration (FHA), and they have to be current on their payments to their homeowners insurance and property taxes. Not all tax environments are created equal, however, since different states have different obligations in terms of the amount of property tax must be paid.
To determine the amount of property taxes in each state, financial information website WalletHub solicited the input of a panel of property-tax experts, in addition to examining U.S. Census Bureau data regarding the 50 states and the District of Columbia in terms of real-estate and vehicle property taxes.
The five territories with the lowest real estate property taxes are as follows, based on WalletHub’s findings:
- Hawaii, 0.27% effective real estate tax rate
- Alabama, 0.42%
- Colorado and Louisiana, tied at 0.53%
- District of Columbia, 0.55%
In contrast, the states with the most expensive property taxes are New Jersey (2.47%), Illinois (2.3%), New Hampshire (2.2%), Connecticut (2.11%) and Wisconsin (1.91%), respectively.
“For real-estate property tax rates, we divided the ‘median real-estate tax payment’ by the ‘median home price’ in each state,” said WalletHub Managing Editor John S. Kiernan regarding the outlet’s methodology. “We then used the resulting rates to obtain the dollar amount paid as real-estate tax on a house worth $204,900, the median value for a home in the U.S. as of 2018 according to the Census Bureau.”
When asked if people should consider property tax levels before moving, it is likely a factor that should be taken into account according to Dr. Paula R. Worthington, senior lecturer and academic director of Harris Policy Labs at the University of Chicago.
“People make choices about where to live based on house prices and features but also based on property taxes and the public services they can expect to receive when living in a given community,” Worthington tells WalletHub. “Lots of empirical evidence suggests that people are willing to pay more for houses with low property taxes than for similar houses with higher property taxes, assuming the schools and other local public services are similar. So, house prices, property taxes, and local public services are closely related.”
See the full property tax report at WalletHub.