Hawaii is the only state with no property tax
Hawaii does not charge property tax on real estate. It is the only state in the United States with a complete absence of property tax. Homeowners and investors in Hawaii pay no annual tax based on the assessed value of land or buildings.
This does not mean Hawaii residents pay no taxes at all. The state collects revenue through other means: income tax, general excise tax (a sales-like tax on most transactions), and various fees. But the specific tax on property ownership that exists in all other 50 states does not exist in Hawaii.
Key Takeaways
- Hawaii is the only state without a property tax on real estate; all other 49 states and the District of Columbia impose some form of property tax.
- Hawaii funds government services through income tax, general excise tax, and fees rather than property tax revenue.
- Some states have very low property tax rates or exemptions for certain property types, but Hawaii is unique in having zero property tax statewide.
- The absence of property tax in Hawaii does not lower overall housing costs, because real estate prices and other living expenses are significantly higher than the national average.
How Hawaii's tax system works without property tax
Hawaii replaced property tax revenue with other tax sources. The state income tax applies to residents and ranges based on income level. The general excise tax (GET) is a 4 percent tax on most goods and services, including rent, which effectively taxes property use even though ownership itself is not taxed.
Counties in Hawaii do not have the power to impose property tax. This is different from most states, where counties and municipalities rely on property tax as a major funding source for schools, roads, and local services. In Hawaii, the state government collects taxes and distributes funds to counties and schools.
States with very low property tax rates (not zero)
While Hawaii is the only state with no property tax, several states have rates well below the national average. Alabama, Louisiana, and Mississippi have property tax rates under 0.5 percent of home value. These states still collect property tax, but at much lower rates than states like New Jersey, Illinois, or Connecticut, where rates exceed 2 percent.
Some states also offer significant property tax exemptions for certain groups. Florida and Texas exempt homestead property (primary residences) from a portion of tax, and many states reduce or eliminate property tax for seniors, veterans, or people with disabilities. These exemptions lower the effective tax rate for those who may have access to, but the tax itself still exists.
Why property tax exists in every other state
All 49 other states and the District of Columbia impose property tax because it is a stable, predictable revenue source for local government. Property tax funds schools, police and fire departments, road maintenance, and county services. Because property value is relatively straightforward to assess and does not change as quickly as income or sales, it provides steady funding year to year.
States that attempted to eliminate or severely limit property tax (like California with Proposition 13 in 1978) found that local services suffered without that revenue. Most states balance property tax with income tax and sales tax to fund operations, rather than relying on one source alone.
Housing costs in Hawaii despite no property tax
The absence of property tax does not make Hawaii an affordable place to buy or own a home. Median home prices in Hawaii are among the highest in the nation, often exceeding $1 million in Honolulu. Property values are driven by land scarcity, demand, and the cost of living on islands, not by the presence or absence of property tax.
Renters in Hawaii pay the general excise tax on rent, which means they bear a tax burden on housing even though property owners do not pay property tax. Over a lifetime, a renter paying 4 percent GET on rent may pay more in housing-related taxes than a homeowner in a low-tax state would pay in property tax.
How to find property tax rates in your state
If you own property or are considering a move, you can find your state's property tax rate through your county assessor's office or your state's department of revenue. Most states publish average effective tax rates (the percentage of home value paid in tax annually). The Tax Foundation and the Lincoln Institute of Land Policy publish state-by-state comparisons.
Your actual property tax bill depends on three things: your state's tax rate, your county's rate (if counties can set their own), and the assessed value of your property. Two homes of identical value in the same state can have different tax bills if they are in different counties or if one qualifies for an exemption.
Frequently Asked Questions
Do I have to pay property tax if I own land in Hawaii?
No. Hawaii has no property tax on real estate, regardless of whether the property is residential, commercial, or vacant land. You will not receive a property tax bill from the state or county. You may still owe other taxes, such as income tax if you earn money, or general excise tax if you rent the property.
Can I move to Hawaii to avoid property tax?
You can move to Hawaii, but property tax savings are unlikely to offset the higher cost of living. Housing prices, food, utilities, and most goods cost significantly more in Hawaii than in most mainland states. The general excise tax on rent and purchases also adds to expenses. People move to Hawaii for reasons other than taxes.
What states have the lowest property tax?
Alabama, Louisiana, and Mississippi have the lowest property tax rates among states that impose it, all under 0.5 percent of home value. Hawaii has zero property tax. After those, states like South Carolina, West Virginia, and Wyoming have rates below 0.7 percent. Rates vary by county within each state.
If Hawaii has no property tax, how do schools get funded?
Hawaii's state government collects income tax and general excise tax, then distributes funds to the state Department of Education. Schools are funded at the state level rather than the local level, which is different from most states where property tax is the primary school funding source. This means school funding in Hawaii depends on state revenue, not local property values.
Will other states eliminate property tax like Hawaii did?
It is unlikely. Hawaii eliminated property tax in 1973 after a specific political decision and replaced it with other revenue sources. Other states have tried to reduce property tax (California's Proposition 13 limited increases, not eliminated the tax) but found that eliminating it entirely creates budget shortfalls for schools and local services. Most states balance multiple tax types instead.