According to a recent WalletHub study, Texas has the seventh-highest real estate property tax rate in the nation.
“Having high real estate taxes is a disadvantage for Texas residents because they have to pay more than $3,000 annually,” said Jill Gonzalez, an analyst with the WalletHub study. “However, it’s an advantage for authorities as the paid taxes contribute to the local budgets, especially considering the fact that Texas has no income tax.”
The WalletHub 2022 Property Taxes by State report found that Texas’s effective real estate tax rate is 1.8%.
“Texas is among the most affordable states to buy a home as the median state home value is lower than the national median value,” Gonzalez told The Dallas Express. “However, the actual tax rate is determined by local authorities and is not connected to the market home value. The lack of an income tax could be a reason why property taxes are higher in Texas.”
The WalletHub study found that the annual taxes on a home priced at the state median value for Texas is $3,099, while the real-estate tax on a median U.S. home value is $3,907.
“The difference is made by the actual home value,” Gonzalez said in an interview. “The median U.S. home value is $217,500 compared to the median home value in Texas is $172,500. The level of real estate taxation is not so much an indication of how well a state’s economy is doing as it is of the sources of income for the local budgets.”
While annual property taxes are $3,907 for Texans, in Hawaii, the rate is only $606, according to WalletHub Study data.
“The reason Hawaii has such low real estate taxes is because it compensates by having some of the highest income and sales taxes in the country,” Gonzalez said. “By comparison, Texas also has high sales taxes but imposes no income tax.”
According to the State Comptroller, the sales tax rate in Hawaii is 4% compared to 6.25% in Texas.
New Jersey and New York have the highest real estate taxes at $5,419 and $3,749, respectively.
“New York only has a slightly lower tax rate, ranking just two spots higher than Texas,” Gonzalez said. “The level of taxation in each state is a decision of the local authorities based on appraisals. It’s all a matter of collecting money for the budget, and if some states have higher real estate taxes, they have other types of taxes that are lower or the other way around.”
Real estate property taxes are known to provide revenue for local municipalities. “They contribute to the stability of a state as these collections are typically used to finance things like education, the police and fire departments, parks, and other public services,” Gonzalez said.
The effective real estate tax rate five years ago in Texas was 1.9%, which is similar to the rate of 1.8% in 2022.
“Adjustments are made by authorities based on local factors and assessments,” Gonzalez added. “What has increased, however, is the median home value both at a state and national level.”
WalletHub Study data shows that the median home value nationwide in 2017 was $178,600 compared to $136,000 in Texas.