Five states have no property tax on real estate
Alaska, Delaware, Montana, New Hampshire, and Oregon do not tax the value of real property — land and buildings. However, "no property tax" does not mean no taxes at all. Each of these states funds schools and local services through other revenue sources: sales tax, income tax, business taxes, or a combination. If you own property in one of these states, you still pay for local services; the bill just arrives differently than a property tax bill.
The absence of property tax does not automatically make these states cheaper places to own a home. A state without property tax might have higher income tax, higher sales tax, or both. The total tax burden depends on your income, spending, and how long you plan to own the property. Someone who earns little but spends a lot may pay less in a high-sales-tax state with no property tax. Someone who earns a high income may pay more.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon do not tax real property, but each funds local services through sales tax, income tax, or other sources.
- No property tax does not mean lower overall taxes — compare income tax, sales tax, and other state levies before assuming a state is cheaper.
- Even in states with no property tax, you may pay assessments to local improvement districts, homeowners associations, or special taxing authorities.
- Property tax rates and rules vary significantly by state, so the tax burden of owning in one state cannot be compared to another without looking at all revenue sources.
How each no-property-tax state funds local services
Alaska has no state income tax and no property tax on real estate. It funds schools and local government primarily through oil revenue and the Alaska Permanent Fund, which distributes earnings from state investments to residents. Local governments also collect sales tax, business taxes, and fees.
Delaware has no sales tax and no property tax on real estate. It funds schools and services through income tax, corporate taxes, and fees. Delaware's corporate tax structure is a major revenue source because many businesses incorporate there for legal reasons.
Montana has no sales tax and no property tax on real estate. It funds schools and local services through income tax, business taxes, and resource extraction taxes (timber and minerals). Property owners may still pay assessments to local improvement districts or special taxing authorities for specific services like water or roads.
New Hampshire has no sales tax and no property tax on real estate. It funds schools and services through income tax on dividends and interest (not wages), business taxes, and fees. Local property owners may also pay assessments to local improvement districts.
Oregon has no property tax on real estate — instead, it taxes the value of timber and minerals separately. It funds schools and services through income tax and sales tax on certain goods. Like other states, Oregon allows local improvement districts and special taxing authorities to assess property owners for specific services.
What "no property tax" actually covers
In these five states, you do not pay an annual tax based on the assessed value of your home or land. However, the phrase "no property tax" is narrower than it sounds. You may still owe money tied to your property:
Local improvement district assessments are charges for specific infrastructure — a new road, water line, or sewer system serving your property. These are not property taxes but assessments for a particular improvement. They appear on your property bill or as a separate invoice from the district.
Homeowners association fees are not taxes but contractual payments to maintain common areas. They are required if you buy in a community with an HOA.
Special taxing authority levies may be imposed by fire districts, water districts, or school districts in some of these states. These are technically not property taxes but function similarly — they are based on property value or acreage and appear on your bill.
Before buying property in any of these states, ask the seller or title company whether the property is subject to any local improvement district assessments or special district levies. These can add hundreds or thousands of dollars per year to your housing costs.
States with very low property tax rates (not zero)
If you are comparing states to minimize property tax, also consider states with the lowest rates rather than only the five with none. Hawaii, Louisiana, and West Virginia have property tax rates below 0.5 percent of home value in most areas — far lower than the national average of about 0.8 percent. These states still collect property tax, but the annual bill is smaller relative to what you would pay in high-tax states like New Jersey, Illinois, or Connecticut.
The difference between a state with no property tax and a state with a 0.3 percent rate may be smaller than the difference in income tax or sales tax. A comprehensive comparison requires looking at all state and local taxes together, not property tax alone.
How property tax rates vary within states
Even in states with no property tax on real estate, local tax burdens vary widely. In Montana and Oregon, for example, some counties and school districts impose special levies that function like property taxes. In New Hampshire, local improvement districts in some towns assess property owners for services. The statewide rule is no property tax, but local exceptions exist.
If you are considering a move to one of these states, research the specific county and town where you plan to buy. Contact the county assessor's office and ask whether the property is subject to any local improvement district assessments, special district levies, or other property-based charges. The absence of state property tax does not may provide the absence of local property-based bills.
Frequently Asked Questions
Do I pay property tax if I own a vacation home in one of these states?
No. The five states with no property tax do not tax real estate regardless of whether it is your primary home, vacation home, or rental property. However, you may owe income tax on rental income in states that have income tax (Delaware, New Hampshire, Montana, and Oregon). Alaska has no income tax.
Can I deduct property taxes on my federal return if I live in a state with no property tax?
You can deduct state and local taxes (SALT) on your federal return up to $10,000 per year. If your state has no property tax but has income tax or sales tax, you can deduct those instead. If you pay local improvement district assessments, they are generally not deductible as property taxes.
If I move from a high-property-tax state to one of these five, will I definitely pay less in taxes?
Not necessarily. A state with no property tax may have higher income tax or sales tax that offsets the savings. Compare your total state and local tax burden in both states, including income tax, sales tax, and any local assessments, before assuming you will pay less.
What if my property is in a local improvement district — do I have to pay the assessment?
Yes. Local improvement district assessments are mandatory if your property benefits from the improvement. You cannot opt out. The assessment is a lien on the property, meaning you must pay it to sell the home or refinance a mortgage.