Hawaii is the only state with no property tax
Hawaii does not levy a property tax on real estate. You own land or a home there, and the state does not charge you an annual tax based on the property's value. No other state has eliminated property tax entirely.
This does not mean Hawaii has no taxes. The state collects income tax, general excise tax (similar to sales tax), and other levies. But the specific annual charge that most states impose on property owners — calculated as a percentage of the home's assessed value — does not exist in Hawaii.
If you own property in Hawaii, you still pay mortgage interest, homeowners insurance, and maintenance costs. You also pay state income tax on wages and business income. But you will not receive a property tax bill from the state or county.
Key Takeaways
- Hawaii is the only state without a property tax on real estate of any kind.
- Other states have low property tax rates or exemptions for certain groups, but all 49 others collect some property tax.
- Hawaii compensates for the missing property tax revenue through income tax, excise tax, and other state levies.
- If you move to Hawaii or own property there, you will owe state income tax and excise tax but no annual property tax bill.
Why Hawaii has no property tax and other states do
Hawaii abolished property tax in 1901, long before it became a state. The territorial government at the time chose to fund public services through other revenue sources instead. When Hawaii entered the union in 1959, it kept that system in place.
Every other state uses property tax as a major source of funding for schools, roads, police, and local government. Property tax is typically the largest source of revenue for counties and school districts. States that tried to reduce or eliminate property tax have found it difficult to replace that revenue without raising other taxes significantly.
Hawaii's reliance on income tax and excise tax means residents and businesses pay more in those categories than residents of many other states. The state's general excise tax of 4 percent applies to most goods and services, which is higher than typical sales tax rates elsewhere. This trade-off — no property tax, but higher income and consumption taxes — shapes the overall tax burden for Hawaii residents.
States with very low property tax rates
While Hawaii is unique, several states have property tax rates well below the national average. Alabama, Louisiana, and Mississippi all have effective property tax rates below 0.5 percent of home value. West Virginia, South Carolina, and Arkansas also rank among the lowest.
These states still collect property tax, but the rate is substantially lower than states like New Jersey, Illinois, or Connecticut, where effective rates exceed 2 percent. The difference matters: a home worth $300,000 in a 0.4 percent state costs $1,200 per year in property tax, while the same home in a 2.5 percent state costs $7,500 per year.
Low property tax states often compensate by collecting higher income tax, sales tax, or both. There is no state that avoids taxation altogether — the revenue has to come from somewhere to fund schools and local services.
Property tax exemptions for specific groups
Many states offer property tax exemptions or reductions for seniors, disabled homeowners, veterans, or people with low incomes. These are not the same as having no property tax statewide. The tax still exists; certain people pay a reduced amount or nothing.
For example, some states exempt the first $50,000 of home value from property tax for homeowners over 65. Others reduce the tax rate for disabled veterans. These programs vary widely by state and sometimes by county within a state.
If you fall into one of these categories, you may owe little or no property tax even in a state with a standard rate. The best way to find out is to contact your county assessor's office or your state's revenue department. They can tell you what exemptions exist in your location and what documentation you need to claim them.
How property tax is calculated and what it funds
In states that collect property tax, the process typically works like this: your county assesses the value of your home, multiplies it by the local tax rate (called the millage rate), and sends you a bill. The rate varies by county and sometimes by school district within a county.
Property tax revenue funds local schools, county government, police and fire departments, road maintenance, and public libraries. In most states, schools receive the largest share — often 40 to 50 percent of property tax revenue. This is why school funding varies so much between wealthy and poor districts: wealthier areas collect more property tax.
Hawaii funds these services through state income tax, excise tax, and other state revenues instead of property tax. This means the state has more control over how money is distributed, rather than leaving it to local property values.
What to know if you own property in Hawaii
If you own a home or land in Hawaii, you will not receive a property tax bill. This is a real financial advantage compared to mainland states. However, Hawaii's cost of living is among the highest in the nation, driven by high housing prices, shipping costs for goods, and the state's overall economy.
You will still owe Hawaii state income tax on wages, business income, and investment income. The state's income tax brackets are progressive, meaning higher earners pay a higher percentage. You will also pay the 4 percent general excise tax on most purchases, which applies to goods, services, and even some groceries.
When you sell property in Hawaii, you may owe capital gains tax if the sale price exceeds what you paid. Hawaii taxes capital gains as ordinary income, so the rate depends on your total income for the year. These taxes explore regardless of whether you are a resident or a nonresident selling Hawaii property.
Frequently Asked Questions
Do I have to pay property tax if I own land in Hawaii but live somewhere else?
No. Hawaii has no property tax for anyone, resident or nonresident. If you own land there, you owe no annual property tax bill to the state or county. You may owe capital gains tax when you sell, but not an ongoing property tax.
Can I move to Hawaii to avoid property tax?
You can move to Hawaii, and you will not pay property tax there. However, Hawaii's overall tax burden is not necessarily lower than other states because of higher income tax and excise tax. Whether moving makes financial sense depends on your income level, spending habits, and the property tax rate in your current state.
What if I own property in Hawaii and also own property in another state?
You will owe property tax on the property in the other state, based on that state's rate and your county's assessment. You will owe no property tax on the Hawaii property. You may owe income tax to both states if you are a resident of both, depending on their residency rules.
Are there any hidden taxes in Hawaii I should know about?
Hawaii's general excise tax of 4 percent is broader than sales tax in most states — it applies to services, rentals, and some groceries in addition to goods. This means your overall tax burden on spending is higher than in states with traditional sales tax. There is no hidden tax, but the excise tax structure is different from what mainland residents may expect.
If Hawaii has no property tax, why is housing so expensive there?
Housing prices in Hawaii are driven by limited land, high demand, shipping costs for building materials, and the state's strong economy — not by property tax. In fact, the absence of property tax may keep some housing prices higher because owners do not face an annual tax bill that would pressure them to sell or reduce prices.