How does the tax burden for homeowners in Scott County and across Tennessee compare with the rest of the nation? Better than one might think, it turns out.
According to a new study released last week by Wallet Hub, the credit card comparison website founded by Capital One’s former marketing director, Tennessee has one of the nation’s lowest property tax rates.
The study found that the average homeowner in Tennessee pays $1,120 in property taxes each year — just about half the national average of $2,279. Only residents of six states pay less in property taxes.
Tennessee’s effective real estate tax rate ranks 14th nationally, at 0.74 percent. That’s nearly three times as high as the lowest state, Hawaii, a 0.27 percent, and less than one-third of the highest state, New Jersey, at 2.45 percent. However, Tennessee’s homeowners fare better than some states with lower tax rates because home values in the Volunteer State are typically lower.
The median home value in Tennessee is $151,700, according to Wallet Hub, which is the nation’s 15th-lowest.
By contrast, the median home value in Hawaii is $563,900. So while Hawaiians pay a far lower tax rate, homeowners there whose property is valued at the median pay $1,529 annually on taxes, higher than the $1,120 paid by homeowners in Tennessee whose property are valued at the median.
On the other end of the spectrum, the median home value in New Jersey is $321,100 — and the median property tax is a whopping $7,840 annually.
The Wallet Hub data breakdown found that residents in blue states — that is, states that typically vote Democratic — often pay more in property taxes than residents in red states, to the tune of almost 20 percent.
For example, the nation’s highest property tax bills are paid by homeowners in New Jersey, Connecticut, New Hampshire, New York, Massachusetts, Illinois, Vermont, Rhode Island and California — in that order, all of them blue states.
However, that isn’t always the case. Texas, a reliably red state, has the nation’s sixth-highest effective property tax rate. Then there’s Hawaii, a Democratic stronghold, where the tax rate is by far the nation’s lowest.
While Tennesseans pay some of the lowest property taxes in the country, four of the six states whose property owners pay less in taxes border the Volunteer State. Alabama, Arkansas and South Carolina each have effective property tax rates that are cheaper than Tennessee’s, at 0.42 percent, 0.63 percent and 0.57 percent, effectively. In Alabama, a homeowner whose property is valued at the state median pays $558 annually.
Mississippi has a property tax rate that is slightly higher than Tennessee, at 0.80 percent, but the median home value there is less — $109,300, carrying an annual tax bill of $879.
However, when it comes to the total tax burden, Tennesseans have an additional leg up. When it comes to the 10 states paying the least in property taxes — Alabama, West Virginia, Arkansas, Louisiana, South Carolina, Mississippi, Tennessee, Kentucky, Oklahoma and Indiana, in that order — Tennessee is the only state that doesn’t levy an income tax on its residents. (That is counter-balanced to some extent because Tennessee has the nation’s highest sales tax rate, nearly 9.5 percent, in the nation. The high sales tax has long prevented an income tax in Tennessee. However, Arkansas has the nation’s third-highest sales tax, at 9.42 percent, and Alabama has the nation’s fifth-highest sales tax, at 9.15 percent, and both of those states also have an income tax. In Kentucky, where the sales tax is 12th-lowest in the U.S., it is still six percent, just a little more than three percent lower than in Tennessee.)
Additionally, Tennessee is one of just 23 states that do not have a vehicle tax. Of the 10 states where homeowners are paying the least property taxes, only one other — Oklahoma — doesn’t not have a vehicle tax. In Alabama, vehicle owners pay an average of $166 per year on each car they own. In Kentucky, that tax swells to nearly $300. It’s more than $850 per year in Mississippi, which has one of the nation’s highest vehicle tax rates.
Of course, not everything applies equally across each state. Within Tennessee, for example, homeowners in Shelby County, which includes Memphis, have an effective property tax rate of 1.49 percent — which would rank as the 12th-highest nationally if Memphis were its own state. In Scott County, by contrast, the effective property tax rate is 0.70 percent — slightly below the state average.
Among Tennessee’s 95 counties, Scott County’s tax rate ranks middle of the pack. Some 27 counties have higher property tax rates, led by Shelby County’s 1.49 percent effective rate, while 67 counties have property tax rates the same as or lower than Scott County’s — with Cumberland County’s effective property tax rate of 0.39 percent being the state’s lowest.
Among adjoining counties, Fentress County homeowners pay an effective tax rate of 0.44 percent — much lower than Scott County’s 0.70 percent — and Campbell Countians pay 0.57 percent. However, residents of Anderson County and Morgan County pay more — 0.81 percent and 0.73 percent, respectively.
Even a county-by-county breakdown can be misleading on its face, however. For example, a penny on the property tax rate does not generate the same amount of money in each county, due to varying median home values. In Scott County, each penny on the property tax rate generates about $30,000 in tax revenue — far less than in Knox County or Anderson County.
The median property value in Scott County is $86,700 — well under the statewide median of $151,700. In Scott County, the average homeowner pays about $607 per year in property taxes. That’s about $100 more per year than the average homeowner in Campbell County, but about $80 less per year than the average homeowner in Morgan County. In Shelby County, the average homeowner pays more than double in property taxes what the average homeowner pays in Scott County, about $1,370 per year. And while Sevier County has one of the state’s lowest property tax rates, at 0.40 percent, due to the large amount of tax revenue generated by tourism there, the average homeowner pays more per year in property taxes — about $633 — than the average homeowner in Scott County, due to higher real estate values.