NEW JERSEY -- Most New Jersey residents of agree that property taxes are among the highest in the nation, and today a new study by personal finance website WalletHub confirmed what many have suspected: We’re No. 1!

New Jersey has the highest property tax rate in the country. To draw thus conclusion, Wallet Hub examined:

  1. Effective Real-Estate Tax Rate,
  2. Annual Taxes on $205K Home (the median home value in the U.S. as of 2018),
  3. Median Home Value in the state, and
  4. Annual Taxes on Home Priced at State Median Value

While the average American household spends $2,375 on property taxes for their homes each year, the average New Jersey homeowner pays $5,064 according to the U.S. Census Bureau.

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High property taxes do impact people who don’t own homes, as well. Renters are indirectly affected because increases in property taxes are eventually passed along in the form of rent increases.

However, higher than average property taxes help pay for better than average school systems in the Garden State.

"The amount of taxes that people pay in New Jersey does have an impact on the real estate market. However, New Jersey has always been higher than the rest of the country," says real estate agent Paul Lamastra of ERA Suburb Realty in Scotch Plains. "Unfortunately, if you want to live in a NYC metropolitan area, and enjoy the salaries that individuals earn in this area, the trade-off is high property taxes,"

"New Jersey is one of the best states in terms of education. This is the sacrifice many people here understand and accept," Lamastra added. "Anyone can move to another state with lower taxes, like Delaware, Georgia or South Carolina, but the wages in those states are much lower than in the Metro NYC area."

Lamastra explained that homebuyers budget principal, interest, taxes, and insurance (PITI in real estate lingo). They figure out what they can afford and stay within their monthly budget. 

"Of course in New Jersey, since the taxes are so high, this equates to buying less house for the money," Lamastra explained. "It’s relative to what we earn monthly vs. what we pay monthly for our PITI."

Another result is that Millennials are living with their parents longer in order to save money and be able to eventually buy a home. In fact, in New Jersey, almost half (47%) of Millennials ages 18 to 38 live with their parents, according to a 2018 New Jersey Policy Perspective report. In contrast, the national figure is 15%, according to a Pew Research Center analysis of U.S. census data.

According to WalletHub, which analyzed the 50 states and the District of Columbia in terms of real-estate taxes, New Jersey was ranked 51st. Nearby states New York (No. 43) and Connecticut (No. 48) also were ranked among the top ten highest taxed states (where the higher number ranking equals higher taxes). Neighboring Pennsylvania was No. 41.

"Local tax policy relying more on property taxes seems to benefit residents in terms of high-quality schooling and healthcare," said WalletHub analyst Jill Gonzalez. "Adjusting it otherwise might hinder one or the other or both."

While senior citizens may be moving out, the high taxes in New Jersey are not holding back people from buying homes here. In fact, Lamastra says that the inventory of homes in the Scotch Plains-Fanwood area is near historic lows.

"Yes it’s true that many people are moving out -- especially the older people because taxes are affecting them -- but young people are making so much money in the metropolitan area and in New York City that they are able to absorb the high taxes," Lamastra says. "Every person should realize that real estate is your best investment that you can have. The stock market is always too risky, and real estate over the long term has shown a great track record. Everyone needs a roof over their head."

Additionally, rental prices are "outrageous,"  and New Jersey is running out of land to build and the population continues to grow , that combination of supply and demand seems to be a real positive force for real estate now and in the future.

Rank

State

Effective Real-Estate Tax Rate

Annual Taxes on $205K Home*

State Median Home Value

Annual Taxes on Home Priced at State Median Value

51

NJ

2.47%

$5,064

$327,900

$8,104

50

IL

2.30%

$4,705

$187,200

$4,299

49

NH

2.20%

$4,498

$252,800

$5,550

48

CT

2.11%

$4,317

$272,700

$5,746

47

WI

1.91%

$3,904

$173,600

$3,308

46

VT

1.88%

$3,853

$223,700

$4,206

45

TX

1.81%

$3,703

$161,700

$2,922

44

NE

1.77%

$3,634

$147,800

$2,621

43

NY

1.71%

$3,497

$302,200

$5,157

42

RI

1.66%

$3,407

$249,800

$4,154

Hawaii was the state with the lowest property tax rate.

Rank

State

Effective Real-Estate Tax Rate

Annual Taxes on $205K Home*

State Median Home Value

Annual Taxes on Home Priced at State Median Value

1

HI

0.27%

$560

$587,700

$1,607

2

AL

0.42%

$854

$137,200

$572

3

CO

0.53%

$1,076

$313,600

$1,647

3

LA

0.53%

$1,091

$157,800

$840

5

D.C.

0.55%

$1,122

$568,400

$3,113

6

DE

0.56%

$1,153

$244,700

$1,377

7

SC

0.57%

$1,174

$154,800

$887

8

WV

0.59%

$1,208

$115,000

$678

9

WY

0.61%

$1,247

$213,300

$1,298

10

AR

0.63%

$1,290

$123,300

$776

 

There was some good news for New Jersey, the state tied for first with the lowest vehicle property tax rate, 0%, according to WalletHub.