The US State With One Of The Highest Property Taxes Isn't What You'd Think

While much of the attention around housing affordability has focused on skyrocketing home prices, property taxes can also have a significant impact on a homeowner's wallet, which is why where you live can make a big difference. Property taxes, which are calculated based on the assessed value of a property, can be a significant source of revenue for local and state governments to use for schools, public safety, and other essential services. While all states impose property taxes, tax rates can vary dramatically depending on where you live. When you think of states with the highest property tax rates, places like New York or California probably come to mind. But surprisingly, neither tops the list. According to 2023 data, Illinois is among the absolute worst states for high property taxes, with homeowners paying a higher effective property tax rate — 1.83% in 2023, per Tax Foundation, although some estimates show a rate of over 2% – than almost anywhere else in the country.

Illinois' effective tax rate is more than twice the national average of 0.90%, according to SmartAsset. On average, that translates to more than $5,000 a year for homeowners, based on the state's median home value, according to WalletHub. Plus, in certain Illinois counties, property taxes are even higher. For instance, in Lake County, which had a median housing value of $326,600, the effective tax rate was 2.68% in 2023, with median taxes of more than $8,700. This is significantly higher than the average U.S. household, which pays less than $3,000, on average, in property taxes every year.

In a state where some homeowners already pay more than 2% above market value to live in certain cities, the added expense from property taxes can make some areas of Illinois unaffordable for many Americans. A primary reason that the property tax rates are so high is because of the sheer number of taxing districts there. Taxing districts are entities that are legally authorized to tax property owners for specific local services or projects. In addition to the standard services that are paid for by most property taxes, these additional taxes can be imposed to pay for anything from local libraries and parks to mosquito abatement.

Illinois has nearly 7,000 of these entities – more than any other state — making it among the most inefficient states in the country. Plus, 58% of residents said the benefits of these services were not worth the cost in a 2023 Illinois Policy Institute poll. This frustration is making many in the state wish they lived elsewhere. In the same poll, more than half of Illinois residents said they would move out of the state if they could — citing high taxes as the reason. While high property taxes have made the state too costly for many, it's not all doom and gloom. There are still pockets that remain affordable. Decatur, for example, is actually one of the most affordable places to live in the U.S. with a low cost of living, affordable housing, and median property taxes of $1,800 — below the national average.