Investing Wisely in States with Lowest Property Tax

Welcome to myCPE

Inside This Article

Rewind to Basics of Property Tax

As we all know, property tax is an annual or semiannual charge levied by a local government and paid by the owners (viz. individuals or legal entities) on the following within its jurisdiction:

Type of Property	Immovable Property	Moveable Property
Also known as	Real Property	Tangible Personal Property
Examples	Land, buildings, & structures	Vehicles, including boats & campers, furniture, and Industrial equipment
Type of Tax	Real Estate Tax	Personal Property Tax

Property tax rates and the types of properties taxed vary by jurisdiction.

Fun Fact: Real Estate Tax and Property tax are often mistakenly used interchangeably, with the former levied solely on real property, while property taxes can encompass both real property and tangible personal property.

Rising Demand for Real Property- Why Invest in Real Estate?

Real estate investing can be a rewarding, long-term investment. A few reasons for the growing popularity of real estate investment in the US are:

Bricks & Mortar Profits: Owning property offers potential rental income and value appreciation.
Hedge Against Inflation: Real estate can retain its value as inflation rises.
Leveraged Investment: Investors can use mortgages to leverage their investments and magnify their potential returns.
Tax Benefits: Property ownership may qualify for tax deductions on certain expenses.
Rising Rental Demand: Around 320,000 homes valued at up to $256,000 are needed to meet the needs of homebuyers, according to a 2023 National Association of Realtors analysis.

How State Property Taxes affect Investment Returns?

Now let’s take a look at a few instances of how property taxes impact investment returns across different asset types:

Real Estate: Lower property taxes mean more rental income and potentially higher long-term appreciation.
Business Equipment & Furniture: Property taxes can reduce depreciation benefits and increase operating costs.
Vehicles: Annual property taxes add to ownership costs and might outweigh depreciation advantages.

This is not an exhaustive list, and specific tax implications can vary depending on the asset type, location, and tax laws.

List of States with the Lowest Property Taxes and Investment Potential in 2024

Serial No.	State	Average Effective Property Tax Rate	Median Home Price	Appreciation Potential	Property Tax Structure	Rental Demand	Landlord-Tenant Laws	Market Trends
1	Hawaii	0.29%	High	Moderate	Simple structure with a flat rate applied to the assessed value	High	Relatively tenant- friendly	Slow population growth and a strong job market in tourism and service sectors
2	Alabama	0.43%	Low	Moderate	Complex structure with varying rates based on location and property class	Moderate	Generally, Generally landlord- friendly	Slow population growth, improving job market in manufacturing and healthcare
3	Colorado	0.52%	Above National Average	High	Limitation on assessed property value growth	High	Balanced	Strong population growth, driven by outdoor recreation and thriving tech industry
4	Nevada	0.55%	Varies by Location	Moderate to High	Flat rate with a separate levy for schools	High in popular areas	Generally, landlord- friendly	Strong population growth in Las Vegas and Reno, driven by tourism and entertainment industries
5	Utah	0.57%	Above National Average	High	Tiered structure based on property value	High	Balanced	Very strong population growth, driven by booming tech industry and high quality of life
6	South Carolina	0.53%	Below National Average	Moderate to High	Complex structure with a base rate and additional local levies	Steady	Leans slightly tenant- friendly	Moderate population growth, strong job market in tourism and manufacturing
7	Louisiana	0.51%	Well Below the National Average	Moderate	Complex structure with varying rates based on location and property class	Moderate	Generally, landlord- friendly	Slow population growth, improving job market in energy and healthcare
8	District of Columbia	0.59%	Very High	Moderate	Flat rate with additional levies for education	Extremely High	Balanced	Strong population growth is driven by the booming job market
9	Wyoming	0.61%	Below National Average	Low	Relatively simple structure with a flat rate applied to the assessed value	Low	Generally, landlord- friendly	Very slow population growth, limited job market outside of natural resources industries
10	Delaware	0.59%	Slightly Above the National Average	Moderate	Complex structure with varying rates based on location and property class	Steady	Balanced	Moderate population growth is driven by the growing financial services industry
11	Arizona	0.60%	Below National Average	Moderate	Complex structure with varying rates based on location and property class	Moderate to High	Generally, landlord- friendly	Moderate population growth, strong job market in tourism and retirement sectors
12	Idaho	0.63%	Below National Average	Moderate	Complex structure with varying rates based on location and property class	Moderate	Landlord - friendly	Moderate population growth, job market growth in tech and agriculture
13	Tennessee	0.65%	Below National Average	Moderate	Complex structure with varying rates based on location and property class	Moderate to High	Generally, landlord- friendly	Moderate population growth, strong job market in manufacturing and healthcare
14	Arkansas	0.66%	Below National Average	Moderate	Complex structure with varying rates based on location and property class	Moderate	Generally, landlord- friendly	Slow population growth, improving job market in manufacturing and retail
15	North Carolina	0.80%	Below National Average	Moderate	Complex structure with a base rate and additional local levies	Moderate to High	Balanced	Moderate population growth, strong job market in finance and research

Exploring Additional Considerations for States with Lowest Property Tax

Low property taxes are undeniably attractive for investors, offering a potential boost to returns across various asset classes. However, successful investing requires a holistic approach, taking into account factors beyond just tax rates, which include:

High costs of living can eat into rental income and potential profits.
Stricter regulations for landlords impact management and potential repair tasks.
Additional fees associated with investment properties, like licensing or inspections.

In short, a holistic approach ensures you consider all the factors that affect your investment's success, not just a single metric like property taxes.

This article is brought to you by www.my-cpe.com

About MY-CPE

MY-CPE is a top-notch continuing education platform known for getting tax updates to its professionals super fast, usually in under 48 hours with the help of 700+ Instructors.

With a reach of 250,000+ accounting and tax professionals, MY-CPE has become a go-to resource in the field.

Whether you're delving into property tax assessments, seeking the latest updates on property tax regulations, or mastering key property tax principles, MY-CPE is the first pick for tax and accounting professionals. Our USP - offering all quality courses through a subscription at highly affordable rates, unlike other platforms that charge by the course.

Check Out Subscription Plans

Go with MY-CPE to stay ahead in your game.

Share with

Jason Dinesen

President, Dinesen Tax & Accounting, P.C.

Jason Dinesen (LPA, EA) is an entrepreneur, tax expert, and CPE Presenter. Dinesen brings over 15 years of experience helping individuals and businesses with accounting, bookkeeping, tax preparation, and business advisory in various industries. Dinesen is a regular CPE Presenter at myCPE. He has coached more than 200k+ accounting, taxes, and HR professionals on various topics of accounting, individual taxation, corporate taxation, and professional ethics. Jason has developed a strong following within the professional community for tax-related subjects. Dinesen is known for sharp tax interpretations, and he quickly brings his analysis of the latest tax updates and IRS guidance to the professional community.