This State Has the Highest Actual Property Taxes (and It is Not Even Shut)

The median U.S. homeowner pays 1.11% of their home’s value in property taxes each year. And based on 2021 home-price data, this translates to a median tax bill of $2,971.

However, some states have significantly higher real estate taxes than the median. Much higher. In fact, there is one state — New Jersey — where the typical homeowner pays nearly three times the tax bill of the median U.S. homeowner. Here’s how much New Jersey homeowners pay and some of the reasons property taxes in the Garden State are so high.

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How high are New Jersey’s real estate taxes?

The median homeowner in New Jersey has an effective real estate tax rate of 2.46% of their home’s value. And to be fair, this percentage isn’t that much higher than some other states. In fact, New Jersey is one of four that have effective real estate taxes of 2% or more, according to our research.

However, thanks to New Jersey’s generally higher home prices, the median real estate tax bill is $8,928. That is 43% higher than the state with the number two median tax bill (Connecticut) and about 12 times as much as the median homeowner pays in Alabama, the state with the lowest property tax bills.

Why are New Jersey’s real estate taxes so high?

There are a few reasons why New Jersey property taxes are so much higher than other states. For one thing, New Jersey is the most densely populated state in the U.S., and this requires relatively expensive infrastructure and maintenance. Public employee costs are higher in New Jersey than in most other states, and the state pension fund is extremely underfunded.

Schools are paid through property taxes, and New Jersey was named the number one state for K-12 public education by U.S. News and World Report in its latest rankings. And not only is New Jersey’s school system the best in the nation, which is partially due to how well-funded it is, but it is also very fragmented with about 600 school districts, which makes things more expensive.

It’s also worth mentioning that real estate taxes are just one form of tax revenue states and local governments can assess, and therefore are only one thing to consider when deciding if a particular state is tax friendly.

As one big example, New Jersey doesn’t have annual property tax on motor vehicles, while some states with relatively low real estate taxes charge auto owners property tax rates of 2% (or more) of their car’s assessed value each year. To be sure, most studies consider New Jersey to be a generally high-tax state, but there’s more to consider than just real estate taxes.

In addition, in many other states, counties and local governments are allowed to impose their own sales taxes but not in New Jersey. The same is true for local income taxes; they simply don’t exist in New Jersey.

The bottom line on New Jersey’s high property taxes

New Jersey’s real estate taxes are very high relative to other states, but there are some valid reasons for it. And for many, some of the benefits (especially the stellar public education system) are worth the cost.

Plus, keep in mind that New Jersey’s real estate taxes are just one part of the level of tax friendliness of the state. There are some potentially expensive taxes that it doesn’t have but that you’ll find in many other states. The bottom line is that there’s a cost-benefit analysis and other tax factors to consider when deciding in which state you want to buy your next home.