Are you thinking of entering the short-term rental market and want to find out what states offer the lowest property tax? Property taxes can be a high cost for vacation rental owners. Therefore, it’s important to explore which states have the lowest rates. This article will explore the 10 U.S. states with the lowest property taxes in 2025 for short-term rentals.

We’ll take a look at how each state fares when it comes to taxation, as well as other factors that could impact your decision. By understanding these key metrics, you can make an informed decision about where to invest in a profitable vacation rental property.

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What is Property Tax, and How is it Calculated?

Property tax is a levy imposed by local governments on the assessed value of real estate property. It is typically allocated to counties and other localities to fund public services such as education, infrastructure, and leisure facilities. The amount of property tax that an individual is liable for depends on their jurisdiction and the type of property being taxed.

Property taxes are calculated by applying a mill levy to a property’s assessed value. This mill levy, also known as the millage tax, is usually expressed as a percentage. It can vary from one jurisdiction to another. In some cases, local governments offer reduced rates or exemptions on certain types of properties. Those include those owned by veterans or seniors – in order to keep the lowest possible property tax rate for their constituents.

To get an accurate picture of your tax rate, you should calculate the mill levy for your county and multiply it by the assessed value of your property. This will help you better understand how much property tax you may be liable for. For example, if your home is worth $250,000 and your property tax rate is 5%, then you’ll need to pay $10,025 in taxes annually.

States with the Lowest Property Tax in 2025

Note: Statistics on Tax rates are from Tax-Rates.org.

1. Louisiana

Median property tax: $243.00/year

Louisiana has one of the lowest tax rates in the country, with only 0.18%. This low rate is mainly due in part to the generous homestead exemption. The exemption allows an individual one homestead exemption of up to $7,500. Property values are also far lower than the national average making this an attractive state for potential rentals.

2. Hawaii

Median property tax: $1,324.00/year

This tropical oasis has one of the lowest tax rates in the country at 0.26% for primary residence homes with an assessed value of less than $1 million.

Hawaii also has the highest median home value in the country, so you can still expect to pay a hefty amount of taxes. The Hotel & Resort tax rate of 1.39% now applies to short-term rentals.

Although the median home value may be higher than other states on this list, Hawaii’s relaxed lifestyle and stunning views can make it a worthwhile investment as a short-term rental host.

3. Alabama

Median property tax: $398.00/year

With an average rate of .33%, Alabama also offers generous exemptions and discounts for veterans, first-time homebuyers, seniors, disabled individuals, and more.

For hosts in Alabama, they are legally required to register with the Alabama Department of Revenue unless an Online Travel Agency (OTA) such as Airbnb collects and remits all state and local lodging taxes on their behalf.

4. Delaware

Median property tax: $1,078.00/year

Delaware is one of the lowest-taxed states in the nation and has some of the lowest  taxes. Not only does Delaware have no VAT or business transaction tax, but its real estate property tax stands at an average of just 0.43%, making it one of the lowest in the country.

Note that 8% of the earnings from each booking are due to the Delaware Division of Revenue.

All and all, any homeowner in Delaware can benefit from these lowest property taxes and use that savings to invest in their home or other projects.

5. District of Columbia

Median property tax: $2,057/year

The nation’s capital is taxed surprisingly low. At just  0.46% of the property’s assessed value, it has one of the lowest tax rates on this list.

However, short-term rental hosts must pay an extra 14.95% in hotel taxes to the city on top of their normal property taxes. This can still make hosting in D.C. profitable, but it is important for hosts to factor these additional expenses into their budgeting.

6. West Virginia

Median property tax: $464.00/year

West Virginia is ideal for property investors looking to purchase a vacation home. Boasting stunning natural beauty and the renowned Appalachian Mountains, the state comes in with tax rates of just 0.49%.

With a median annual tax rate of only $464/per year, investing in West Virginia is almost as good as it gets when it comes to the lowest tax rates. The average home price in West Virginia is around $135,000, making it one of the most attractive states for vacation homes on a budget.

If you’re looking for an affordable place to invest in real estate and enjoy natural beauty, then look no further than West Virginia.

7. South Carolina

Median property tax: $689.00/year

South Carolina has long been a desirable vacation rental market, thanks to its low property taxes and mild climate throughout the year. The median annual property tax payment in South Carolina is just $698, while the average property tax rate is only 0.50%.

In addition to the property tax, short-term rental hosts are also required to pay a 7% state sales tax to the South Carolina Department of Revenue. All in all, South Carolina is an attractive market for those wishing to start a vacation rental.

8. Arkansas

Median property tax: $532.00/year

Arkansas’s average rate of 0.52% is a significant draw for vacation home buyers looking to purchase property in the state. Plus, it’s quickly growing in popularity as a vacation destination.

According to Arkansas officials, tourism spending increased by 33% from 2020. In 2021, 41 million people visited Arkansas, compared to 29.2 million in 2020 – a substantial increase reflecting this destination’s growing popularity. Furthermore, lodging spending has grown by over 5% since 2019.

In addition to its low average property tax rate, prospective buyers will be pleased to learn that Arkansas also imposes a 1% short-term rental tax on vacation rentals for the state Department of Finance and Administration. This is considerably lower than the total combined taxes charged in many other states, making Arkansas a great option for purchasing vacation properties.

9. Mississippi

Median property tax: $508.00/year

The average assessed fair market value of a home in Mississippi is $98,000. Residents pay an average of 0.52% in taxes per year. This results in an annual median payment of $508 – one of the lowest in the United States. Furthermore, with a median income of $45,925 per year, the median yearly property tax paid by Mississippi residents accounts for approximately 1.1% of their annual income. This makes Mississippi’s lowest property taxes even more attractive to potential homebuyers.

Mississippi offers ample opportunities for homeowners to save on their taxes. For instance, the state provides special tax exemptions for the elderly and disabled and a homestead exemption that can reduce property taxes by up to 50%.

In addition, Mississippi also allows homeowners to pay their taxes in installments if unable to make an entire payment at once. This flexibility makes Mississippi’s lowest property taxes even more accessible to a variety of homeowners.

10. New Mexico

Median property tax: $880.00/year

New Mexico is an attractive option for short-term rental hosts. At just 0.55% of a property’s assessed fair market value, this is an excellent option for those looking to make an estimated gain from rental income without having to pay too much in taxes.

The median annual New Mexico property tax payment is only $880 per year, making it one of the lowest property tax states in the U.S.

New Mexico also has a median income of $52,032 per year. This means that the typical homeowner pays only 1.7% of their annual income in property taxes. With such low rates and fantastic scenery to enjoy, New Mexico is an ideal location for those looking to invest in short-term rentals.

In addition to low property taxes, New Mexico also has a wide range of other tax benefits for investors. New Mexico offers income tax credits for those who invest in real estate and businesses located within NM. This can be an attractive option for those looking to maximize their profits from a rental property.

Final Thoughts

Each U.S. state has its own regulations and taxes on properties. The states listed in this article have some of the lowest rates in the country. Potential buyers can make an informed decision about which state offers them the lowest property tax rates so they can optimize their investment in rental properties.

Host Tools provides an automated, unified calendar for short-term rental hosts, allowing you to seamlessly list on all major channels. Start your free trial today!