Four states have no property tax on residential real estate

Hawaii, Delaware, Alabama, and the District of Columbia do not charge property tax on homes. These are the only places in the United States where you own a house outright without paying annual property tax to a state or local government.

However, "no property tax" does not mean "no housing costs to the government." Each of these places funds schools, roads, and services through other taxes — usually income tax, sales tax, or both. Understanding what you pay instead of property tax matters more than the headline alone.

The other 46 states and territories all charge property tax on residential property. The rates, assessment methods, and what counts as taxable vary widely, but the tax itself is universal outside these four.

Key Takeaways

  • Hawaii, Delaware, Alabama, and Washington D.C. charge no property tax on homes, but each funds government through income tax, sales tax, or both.
  • Hawaii and Delaware have high income taxes that offset the lack of property tax, while Alabama has low income tax and moderate sales tax.
  • Washington D.C. residents pay federal income tax plus D.C. income tax, making the overall tax burden context-dependent on your income level.
  • Moving to a no-property-tax state does not automatically lower your total tax bill; comparing income tax, sales tax, and property tax rates in your current state is necessary.

Hawaii: No property tax, high income tax

Hawaii taxes income but not property. The state income tax rate ranges from 1.4% to 11%, depending on your income bracket. For high earners, this is one of the steepest income tax rates in the country.

Hawaii also charges a 4% state sales tax, plus county sales taxes that range from 0.5% to 4.5%, bringing the total sales tax to between 4.5% and 8.5%. Property owners pay no annual property tax, but renters and homeowners both pay these income and sales taxes.

For someone earning $50,000 per year, Hawaii's income tax is roughly $2,500 to $3,500 depending on filing status. A homeowner in a state with 1% property tax on a $400,000 home would pay $4,000 per year in property tax alone. The comparison depends entirely on your income and home value.

Delaware: No property tax, moderate-to-high income tax

Delaware taxes income but not property. The state income tax rate ranges from 2.2% to 5.75%, which is lower than Hawaii but still substantial. Delaware also charges a 0% state sales tax, making it attractive to people who buy goods in-state.

However, Delaware's lack of sales tax does not offset income tax for most residents. Someone earning $60,000 per year pays roughly $1,300 to $2,000 in Delaware income tax. A homeowner in a neighboring state with 1% property tax on a $350,000 home would pay $3,500 per year in property tax, making Delaware potentially cheaper for that person.

Delaware's advantage is most visible for high-income earners and people who make large purchases in-state. For moderate earners, the income tax burden is still significant.

Alabama: No property tax, low income tax, moderate sales tax

Alabama taxes income but not property. The state income tax rate ranges from 2% to 5%, one of the lowest in the country. Alabama also charges a 4% state sales tax, plus county and city sales taxes that can bring the total to 7% to 11% depending on location.

For someone earning $40,000 per year, Alabama income tax is roughly $800 to $1,200. A homeowner in a state with 1.2% property tax on a $250,000 home would pay $3,000 per year in property tax. In this scenario, Alabama is substantially cheaper.

Alabama's combination of low income tax and no property tax makes it the least expensive option for moderate earners and retirees on fixed incomes. The trade-off is higher sales tax, which affects people who spend heavily on goods.

Washington D.C.: No property tax, but federal and local income tax

Washington D.C. does not charge property tax on residential real estate. However, D.C. residents pay federal income tax (like all U.S. citizens) plus D.C. income tax, which ranges from 4% to 9.75%.

D.C. also charges a 6% sales tax on most goods. For someone earning $55,000 per year, D.C. income tax is roughly $2,200 to $3,000, plus federal income tax. A homeowner in Maryland or Virginia with 0.8% property tax on a $400,000 home would pay $3,200 per year in property tax alone.

D.C.'s tax burden is comparable to or higher than neighboring states for most residents. The advantage of no property tax is offset by income tax and sales tax. D.C. is unique because it is not a state and has no state income tax — only a local income tax that functions similarly.

How property tax compares across the other 46 states

Every other state charges property tax on homes. The median effective property tax rate across the country is roughly 0.8% to 1.1% of home value per year, but this varies significantly by state and county.

New Jersey, Illinois, and Connecticut have the highest effective property tax rates, often exceeding 2% of home value. Hawaii, Alabama, Louisiana, and West Virginia have the lowest rates among states that do charge property tax, typically below 0.5%.

Property tax is assessed on the market value of your home, which is determined by your local assessor's office. The rate is set by your county or municipality, not the state. This means two homes of equal value can have very different property tax bills depending on location.

Comparing total tax burden: property tax versus income and sales tax

Whether moving to a no-property-tax state saves you money depends on your income, spending habits, and current home value. A person earning $100,000 per year with a $500,000 home in New Jersey (property tax roughly 2.5%, or $12,500 per year) might pay less total tax in Hawaii or Delaware, despite higher income tax.

Conversely, someone earning $30,000 per year with a $200,000 home in a low-property-tax state like Louisiana (property tax roughly 0.4%, or $800 per year) would likely pay more total tax in Alabama or Delaware due to income tax.

The only way to know whether a move is financially beneficial is to calculate your current total tax bill (property tax plus state income tax plus state sales tax) and compare it to the total in the state you are considering. Use your actual income, home value, and spending to make this comparison.

Frequently Asked Questions

Do I still have to pay federal property tax in these states?

No. There is no federal property tax on homes in any state. Property tax is always a state and local tax. The four states mentioned have no state or local property tax on residential real estate.

Can I deduct property tax on my federal income tax return if I live in a no-property-tax state?

You can only deduct property tax you actually pay. If your state charges no property tax, there is nothing to deduct. You may be able to deduct state income tax or sales tax instead, depending on your situation and the current tax code.

If I own a home in a no-property-tax state and move, do I owe back property taxes?

No. You never owed property tax in the first place. When you sell the home, you may owe capital gains tax if the home increased in value, but that is a federal tax, not a property tax.

Are there any hidden costs to owning a home in these states instead of property tax?

No hidden costs, but there are visible ones: higher income tax and sales tax. Some counties in these states charge annual vehicle registration fees or homeowner association fees, but these are not property tax and vary by location.

Is it cheaper to retire in Alabama or Hawaii if I have no income?

If you have no income, you pay no income tax in either state. Hawaii charges sales tax on purchases; Alabama charges higher sales tax. For a retiree living on savings with no earned income, Alabama is typically cheaper due to lower sales tax rates.