As a homeowner, you’re likely very familiar with the concept of property taxes. You pay them every year, usually without even knowing it. But what do you really know about America’s worst states for property taxes? In this blog post, we take a look at five of America’s worst states for property taxes and why they rank so low.
From high-tax states to those with burdensome rules and regulations, read on to learn more about why these states may not be the best place for you to call home.
According to IHS Global Insight, New Jersey is one of the five worst states in America for property taxes. This is due to its high state and local tax burden as well as its low median home value. In addition, New Jersey has a relatively high cost of living, making it difficult for residents to pay their property taxes. According to WalletHub, the state’s overall tax burden is the fifth highest in the country.
In order to reduce its tax burden, New Jersey has enacted a number of tax reform measures over the past few years. These include reducing the rates for personal and corporate income taxation, expanding the sales and use tax base, and enacting a business franchise tax. However, these measures will only take effect if lawmakers can agree on a budget that includes funding for them. In spite of these efforts, New Jersey’s overall tax burden remains among the highest in the country.
California is one of the most expensive states in which to own a home. In addition, the state has some of the highest property taxes in the country. According to The Tax Foundation, California’s property taxes are $11,801 on average, ranking it as the fifth worst state in terms of property taxes.
Some other factors that contributed to California’s ranking as the fifth worst state for property taxes include its high rate of personal income tax (14.3%), large number of exemptions and deductions available on local taxes (24%), and its high sales tax rate (9.25%).
While California may have some of the highest property taxes in the country, it does offer some generous tax breaks that make owning a home more affordable. For example, Californians can deduct their mortgage interest and property taxes from their taxable income. Additionally, homeowners can also exclude their principal residence from their taxable income. These tax breaks make owning a home in California more affordable than in many other states.
Illinois ranks as the fifth worst state for property taxes, according to a study by WalletHub. The median amount paid in property taxes in Illinois is $5,474, which is more than double the national median of $2,083. Additionally, Illinois has the third-highest property tax burden rate as a median income percentage — 47.3%.
The high cost of living and stiff property taxes are key reasons why residents in Illinois rank as the fifth-worst state for property taxes. In fact, more than one-third (34%) of Illinois’s residents live below the poverty line, which is higher than in any other state in the country. Additionally, a high rate of debt makes it difficult for families to afford to pay their property taxes. As a result, they frequently have to choose between groceries or paying their bills.
To make matters worse, state and local governments in Illinois are facing an unprecedented budget crisis. Municipal governments in particular are struggling to make ends meet due to cuts in federal funding and increasing demands from service providers such as healthcare and education. This has led to increased rates and restrictions on services provided by municipalities, including reductions in police forces and cuts to maintenance budgets.
Rhode Island ranks fifth worst out of the 50 states in terms of property taxes paid as a percentage of median household income. The state’s cap on annual property tax increases gives homeowners some relief, but it has not been able to keep up with inflation. In 2018, the average homeowner in Rhode Island will pay $4,724 in taxes, which is more than double the $1,765 paid by homeowners in Connecticut and nearly triple the $1,139 paid by homeowners in New Hampshire.
In order to make up for this shortfall, Rhode Island relies heavily on its income tax system. The state has a top marginal income tax rate of 9.0%, the highest rate in the country. Combined with an increased sales tax (8.5%), it makes life especially difficult for businesses and workers who earn an income outside of Rhode Island. In addition, the state has a wide variety of other taxes and fees that can add up quickly.
New York has the second highest overall property taxes in the country at 9.4% of total household income. This is far above the national average of 3.9%. In addition, homeowners in New York pay an additional 2.1% surtax on their total tax bill, putting it third on the list of most punishing states for homeowners.
Overall, there are several reasons why you may want to avoid states with high property taxes. High property taxes can make homeownership less affordable, make it more difficult to sell your home, and impact the overall value of your home. By considering the property taxes in a state before purchasing a home, you can make an informed decision about whether a particular location is right for you.