Hawaii is the only state with no property tax on real estate
Hawaii does not levy a property tax on real property — land and buildings. This makes it the sole state in the United States with no property tax system. However, Hawaii residents and property owners still pay other taxes, including state income tax, general excise tax (a sales-like tax), and county-level fees. The absence of property tax does not mean property ownership is tax-free; it means the specific tax that most states use to fund schools, roads, and local services works differently there.
The reason Hawaii has no property tax traces to its history as a territory. When Hawaii became a state in 1959, it retained a tax structure based on general excise tax rather than adopting the property tax model most states use. Over time, this system remained in place even as the state's economy and population changed. The general excise tax became Hawaii's primary funding mechanism for public services instead.
Key Takeaways
- Hawaii is the only state without a property tax on real estate, though property owners pay other state and local taxes including income tax and general excise tax.
- Several states have very low property tax rates or exemptions for certain types of property, but none eliminate property tax entirely the way Hawaii does.
- Property tax rates in other states range from under 0.3% to over 2% of assessed value, depending on the state and county.
- If you own property in Hawaii, you will still owe state income tax, county fees, and general excise tax on goods and services.
States with the lowest property tax rates
While Hawaii is unique in having no property tax, several states have rates well below the national average. Alabama, Louisiana, and Mississippi have effective property tax rates under 0.5% of home value. These states fund schools and local services through higher income taxes, sales taxes, or other revenue sources instead.
The effective property tax rate — what you actually pay as a percentage of your home's value — varies widely by state and county. A state with a low rate statewide may still have counties with higher rates, and vice versa. For example, New Jersey has one of the highest average property tax rates in the nation, but some counties within it are lower than others. The rate you pay depends on where the property sits, not just which state you live in.
How Hawaii funds schools and services without property tax
Hawaii relies on state income tax and general excise tax (GET) to fund public schools, roads, police, and other services that property taxes fund in other states. The general excise tax is a 4% tax on most goods and services sold in Hawaii, similar to a sales tax but broader in scope. This means Hawaii residents pay tax on more transactions than residents of states with traditional sales taxes.
State income tax in Hawaii ranges from 1.4% to 11% depending on income level, making it one of the higher income tax states. Combined with the general excise tax, the total tax burden on Hawaii residents can be substantial, even without property tax. A person who owns property in Hawaii pays income tax on wages, general excise tax on purchases, and county fees for services — but not a direct property tax.
What property owners in Hawaii actually pay
Hawaii property owners receive a bill from their county for property-related fees and assessments, but this is not called a property tax. These fees cover water, sewer, refuse collection, and other services. The amount varies by county and by the specific services used. On Oahu, for example, county fees for a typical residential property can range from a few hundred to several thousand dollars per year, depending on the property's characteristics and location.
Additionally, Hawaii property owners pay state income tax on any rental income from the property, capital gains if they sell, and general excise tax on materials and services used for repairs or maintenance. A property owner in Hawaii is not exempt from taxation — the tax structure is straightforward different from states that use property tax as the primary local revenue source. The total amount paid may be comparable to property tax in other states, just collected through different mechanisms.
Why other states have not eliminated property tax
Property tax is the largest source of funding for K-12 schools in most states. Eliminating it would require replacing that revenue with income tax, sales tax, or other sources — a shift that would affect every resident and business. States that have considered reducing or eliminating property tax have generally found that the political and fiscal challenges are substantial.
Hawaii's system works partly because it was established before property tax became the national standard, and partly because the state has a smaller, more concentrated population than most large states. Replicating Hawaii's model in a state like California or Texas would require restructuring hundreds of billions of dollars in school funding — a change that would face significant opposition from both taxpayers and local governments that depend on property tax revenue.
How property tax rates compare across states
| State | Effective Property Tax Rate | Notes |
|---|---|---|
| Hawaii | No property tax | Funded by income tax and general excise tax instead |
| Alabama | Under 0.5% | One of the lowest rates in the nation |
| Louisiana | Under 0.5% | Varies significantly by parish |
| Mississippi | Under 0.5% | Low rate but higher sales tax |
| New Jersey | Over 2% | Among the highest rates in the nation |
| Illinois | Around 0.8% | Varies widely by county |
The effective rate shown is the average amount property owners pay as a percentage of their home's assessed value. This rate can vary significantly within a state depending on the county, school district, and local services. A property in one county may have a much different tax bill than an identical property in another county, even within the same state.
When comparing states, remember that a low property tax rate does not necessarily mean a lower overall tax burden. A state with no property tax may have higher income tax or sales tax that affects your total cost of living. The tax structure that works best for you depends on your income, spending habits, and whether you own property.
Frequently Asked Questions
Do I pay property tax if I own land in Hawaii?
No, Hawaii has no property tax on real estate. You will pay county fees for services like water and sewer, state income tax on any rental income from the property, and general excise tax on purchases and services. But you will not receive a property tax bill from the state or county.
Is Hawaii's total tax burden lower than other states?
Not necessarily. While Hawaii has no property tax, the combination of state income tax (up to 11%) and general excise tax (4%) can result in a total tax burden similar to or higher than states with property tax. The actual amount you pay depends on your income, spending, and the value of your property.
Can I move to Hawaii to avoid property tax?
You can own property in Hawaii without paying property tax, but you will pay other taxes including state income tax and general excise tax. If you move to Hawaii and work there, you will owe Hawaii state income tax on your wages. The tax savings from avoiding property tax may be offset by higher income or sales taxes.
Why doesn't my state eliminate property tax like Hawaii?
Property tax funds most public schools in the United States. Eliminating it would require replacing hundreds of billions of dollars in revenue through income tax, sales tax, or other sources. Hawaii was able to use a different system because it established its tax structure before property tax became the national standard, and because it has a smaller population than most large states.
What if I own property in two states, one with high property tax and one with low?
You pay property tax to the state and county where the property is located. If you own a home in New Jersey (high property tax) and a vacation home in Alabama (low property tax), you pay New Jersey's rate on the New Jersey property and Alabama's rate on the Alabama property. You cannot choose which state's tax rate applies.