Ask any homeowner about expenses and they’ll tell you: If you’re a first-time buyer, you need to carefully calculate the total cost of owning a home before taking the plunge into homeownership.
Owning a home comes with dozens of additional costs, from mortgage payments and interest to upkeep, renovations, and household utility bills. It doesn’t take long before expenses add up—especially when they come on top of potential property tax costs.
To determine which states offer the lowest in property taxes, Roofstock analyzed 2021 data from Wallethub and the U.S. Census Bureau. Costs were then determined for real estate property tax rates, median real estate tax payments, and median home prices for every state and Washington D.C. These amounts were then contextualized with what first-time homebuyers need to know about property taxes.
Arkansas by the numbers
– Effective real estate tax rate: 0.62%
– Annual taxes on $217.5k home: $1,358
– Arkansas’s median home value: $127,800
– Annual taxes on Arkansas’s median home: $798
Governing bodies in Arkansas calculate taxes for residential property quite differently than many other states. Arkansas real estate is taxed at the state, county, city, and school district level—and taxes are based on a property’s assessed value.
What helps to keep the tax rate low in this state, though, is that the assessed value is equal to just 20% of the appraised value of a property—so a home worth $200,000 in Arkansas would only pay taxes on an assessed value of $40,000. And, considering that the median home value in Arkansas is much lower than that at just over $120,000, the 20% assessed value equates to extremely low real estate taxes in this state. Plus, other restrictions, which include a 5% limit on assessed value increases per year, help to keep the tax rate low in Arkansas year after year.
In some states, the high cost of property taxes can cause a home with an otherwise affordable price tag to be well out of someone’s price range. In others, the low cost of property taxes could give you a little more wiggle room in your budget—which is never a bad thing.
If the idea of weighing the estimated costs of property taxes seems overwhelming to you, start by looking at the states with the lowest property taxes listed below. The national list is reverse-ordered by effective real estate tax rate, with Hawaii as the state with the lowest property taxes, though the results would look different if it was ordered by the taxes on the state’s median home. Whether you’re looking for a dream home or next big investment, owning a home comes with several additional costs, property taxes being one of them.
States with the lowest property taxes
#1. Hawaii: 0.28% effective real estate tax rate
#2. Alabama: 0.41% effective real estate tax rate
#3. Colorado: 0.51% effective real estate tax rate
#4. Louisiana: 0.55% effective real estate tax rate
#5. Washington, D.C.: 0.56% effective real estate tax rate
This story originally appeared on Roofstock and was produced and distributed in partnership with Stacker Studio.