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See how low property taxes in California are

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January 14, 2022
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This story originally appeared on Roofstock and was produced and distributed in partnership with Stacker Studio.

See how low property taxes in California are

Ask any homeowner about expenses and they’ll tell you: If you’re a first-time buyer, you need to carefully calculate the total cost of owning a home before taking the plunge into homeownership.

Owning a home comes with dozens of additional costs, from mortgage payments and interest to upkeep, renovations, and household utility bills. It doesn’t take long before expenses add up—especially when they come on top of potential property tax costs.

To determine which states offer the lowest in property taxes, Roofstock analyzed 2021 data from Wallethub and the U.S. Census Bureau. Costs were then determined for real estate property tax rates, median real estate tax payments, and median home prices for every state and Washington D.C. These amounts were then contextualized with what first-time homebuyers need to know about property taxes.

California by the numbers

- Effective real estate tax rate: 0.76%
- Annual taxes on $217.5k home: $1,644
- California's median home value: $505,000
- Annual taxes on California's median home: $3,818

The median home price in California may be extremely high—clocking in at more than half a million dollars on average—but the real estate tax rate is one of the lowest in the nation. The low real estate tax rate is due in major part to just one law: Proposition 13, which was approved by California voters in 1978. Proposition 13 has two important features that keep real estate taxes low in California: one that limits the general property taxes to 1% of a property’s market value, and the other that limits any increases in assessed value to 2% per year.

There are other factors that help to keep California’s tax rates low, too. For starters, the property taxes residents pay are based on the purchase price of the property, and the 2% annual increase cap helps keep the rates low for homeowners. Plus, homeowners in California can claim a $7,000, one-time exemption on their primary residence, which further reduces the assessed value and keeps the real estate tax rates extremely low in a state otherwise known for its high tax burdens.

In some states, the high cost of property taxes can cause a home with an otherwise affordable price tag to be well out of someone’s price range. In others, the low cost of property taxes could give you a little more wiggle room in your budget—which is never a bad thing.

If the idea of weighing the estimated costs of property taxes seems overwhelming to you, start by looking at the states with the lowest property taxes listed below. The national list is reverse-ordered by effective real estate tax rate, with Hawaii as the state with the lowest property taxes, though the results would look different if it was ordered by the taxes on the state's median home. Whether you're looking for a dream home or next big investment, owning a home comes with several additional costs, property taxes being one of them.

States with the lowest property taxes

#1. Hawaii: 0.28% effective real estate tax rate
#2. Alabama: 0.41% effective real estate tax rate
#3. Colorado: 0.51% effective real estate tax rate
#4. Louisiana: 0.55% effective real estate tax rate
#5. Washington, D.C.: 0.56% effective real estate tax rate

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