Four states have no property tax on real estate, but the trade-off varies
Four states do not levy property tax on real estate: Alaska, Delaware, Montana, and New Hampshire. However, each state makes up the lost revenue differently — through income tax, sales tax, or other levies — so the overall tax burden on property owners is not necessarily lower than in states that use property tax.
Alaska has no state income tax and no sales tax, making it the lightest-taxed state overall. Delaware has no sales tax but does tax income. Montana taxes income but exempts most tangible personal property from tax. New Hampshire taxes income only on dividends and interest, not wages, and has no sales tax.
If you own property in one of these states or are considering a move, understanding how each state funds services without property tax helps you compare your actual tax cost against states that do use property tax.
Key Takeaways
- Alaska, Delaware, Montana, and New Hampshire are the only states without property tax on real estate.
- States without property tax fund schools and services through income tax, sales tax, or other revenue sources, so property owners may pay more in other taxes.
- Alaska has the lowest overall state tax burden because it has no income tax or sales tax.
- New Hampshire taxes only investment income, not wages, making it attractive to workers but not retirees living on dividends.
Alaska: No income tax, no sales tax, no property tax
Alaska is the only state with no property tax, no income tax, and no statewide sales tax. Property owners in Alaska pay no annual tax to the state on the value of their home or land. Instead, Alaska funds state and local services through oil revenue, a permanent fund dividend paid to residents, and local taxes that vary by municipality.
Some Alaska municipalities do impose local property taxes or sales taxes, so the actual tax burden depends on where in the state you own property. Anchorage, for example, has a local property tax. Juneau has a local sales tax. You need to check the specific borough or city rules where your property is located.
Alaska's lack of state income tax also means no tax on wages, investment income, or retirement distributions, which makes it attractive to high-income earners and retirees.
Delaware: No sales tax, but income tax applies
Delaware has no property tax on real estate and no sales tax. However, Delaware does tax income on wages, investment gains, and retirement withdrawals. The state income tax rate ranges from 2.2% to 5.75% depending on income level.
Delaware's lack of sales tax means you do not pay tax on purchases of goods or services within the state. For property owners, this means no annual property tax bill, but income earned in Delaware or from Delaware sources is taxable.
Delaware's tax structure appeals to people with substantial property holdings but lower income, or to those who spend heavily on goods and services. High-income earners may find the income tax offset the savings from no property tax.
Montana: Income tax but no property tax on real estate
Montana has no property tax on real estate but does tax income. The state income tax rate ranges from 1% to 6.9% depending on income level. Montana also has a 3% sales tax on most goods and services.
Montana exempts most tangible personal property — such as vehicles, equipment, and inventory — from property tax, which is unusual. This exemption benefits businesses and farmers who own significant equipment or livestock.
For homeowners, the lack of property tax is offset by income and sales tax. Montana's overall tax burden is moderate compared to high-property-tax states, but higher than Alaska's.
New Hampshire: Income tax only on investment earnings
New Hampshire has no property tax on real estate and no sales tax. However, New Hampshire taxes income, but only on dividends, interest, and investment gains — not on wages. The tax rate on investment income is 5%.
This structure makes New Hampshire attractive to wage earners, who pay no income tax on their salary. Retirees living on investment income, pensions, or Social Security face a different calculation: Social Security is not taxed in New Hampshire, but distributions from retirement accounts that include investment gains are taxed.
New Hampshire also has no sales tax, so purchases of goods and services are not taxed. Combined with no property tax, this makes New Hampshire one of the lower-tax states for working people with modest investment income.
How states without property tax fund schools and services
States without property tax must fund public schools, roads, police, and other services through other revenue sources. The methods vary:
- Alaska relies on oil revenue and the Alaska Permanent Fund, which distributes earnings to residents.
- Delaware uses income tax and corporate tax (Delaware is a corporate tax haven, so many companies incorporate there).
- Montana uses income tax and sales tax.
- New Hampshire uses income tax on investment earnings and sales tax.
In states with property tax, the tax typically funds local schools and services. In states without property tax, funding comes from the state level and is distributed to local areas, which can create disparities in school funding and services depending on state budget priorities.
Comparing total tax burden: property tax versus other taxes
A homeowner in a no-property-tax state does not automatically pay less in total taxes. The comparison depends on your income, spending, and investment earnings.
A high-income earner in New Hampshire pays 5% tax on investment income but no property tax or sales tax. The same person in a state with 1.5% property tax on a $400,000 home ($6,000 per year) plus no income tax might pay less overall — or more, depending on how much investment income they have.
A retiree in Alaska with no income tax and no property tax pays less than a retiree in a state with both. A wage earner in New Hampshire with no income tax on wages but property tax in their home state might pay more or less depending on the property tax rate and their home value.
To compare your actual tax burden, calculate your property tax, income tax, and sales tax in your current state, then do the same for the no-property-tax state you are considering. The result depends on your specific situation.
Frequently Asked Questions
Do I have to pay property tax if I own land in Alaska, Delaware, Montana, or New Hampshire?
No state property tax applies to real estate in these four states. However, some municipalities within these states do impose local property taxes. Check with the specific city or county where your property is located to confirm whether a local property tax applies.
If there is no property tax, are home prices higher or lower in these states?
Home prices in no-property-tax states are driven by the same factors as any other state: location, demand, job market, and cost of living. Alaska and Montana have lower home prices in many areas due to lower population density and fewer job opportunities. New Hampshire and Delaware have higher home prices in some areas due to proximity to major cities and strong job markets. The absence of property tax does not automatically make homes cheaper.
Can I move to one of these states to avoid property tax?
You can move to any state, but residency for tax purposes is determined by where you live and work, not by intention. If you move to Alaska, Delaware, Montana, or New Hampshire and establish residency there, you would be subject to that state's tax rules. Your former state may still tax income earned before you left or property you still own there. Consult a tax professional about your specific situation before moving for tax reasons.
Which no-property-tax state has the lowest overall taxes?
Alaska has the lowest overall state tax burden because it has no property tax, no income tax, and no statewide sales tax. However, some Alaska municipalities impose local taxes, and the cost of living in Alaska is generally higher than in the other three states. New Hampshire is the second-lowest for wage earners because it taxes only investment income, not wages.
Do these states have lower quality schools or services because they do not use property tax?
School and service quality varies within each state and depends on local funding, state budget priorities, and how revenue is distributed. Some areas in no-property-tax states have excellent schools and services; others have less funding. The same variation exists in property-tax states. Funding structure alone does not determine quality — it depends on how much total revenue the state collects and how it is allocated.