These States Move to End Property Taxes

Dave Meyer:
Property taxes have become one of the fastest growing costs of home ownership in America. They’re actually up nearly 30% since 2019, that’s a national average. And now a broad political revolt is starting to take shape across the country. More than a dozen states are actively weighing proposals to limit, reduce, or fully eliminate property taxes. And some of these ideas are serious. They could actually be implemented. So the implications for the housing market and real estate investors are significant. Today on On The Market, we’re breaking it down. We’re talking about the great property tax revolt, how property taxes have evolved, how they’re impacting the market today, what remedies are being proposed, and which ones are likely to pass. And of course, we’ll talk about how this all could impact your portfolio and what you should be doing about it.
Hey everyone, welcome to On The Market. I’m Dave Meyer, investor and chief investment officer at BiggerPockets. Today on the show, we’re digging into one of the biggest sticker shocks investors have been facing and dealing with in recent years, property taxes. Back in the day, I remember fondly the time when property taxes were just background noise where you just didn’t really think about it. They kind of were what they were. Now they are a major expense category and the change in property taxes and how quickly they’re changing has become a constant source of stress. And it’s something that investors just have to deal with more and more because property taxes are significantly impacting the overall big picture costs of homeownership in the United States. They’re also impacting cash flow and overall return on investment for investors as well. And this problem is now starting to get more and more political attention.
Actually, more than a dozen states now have legislation to try and figure out some level of relief for homeowners and in some cases for investors as well. And this is everything from caps on how much property taxes can go up, full on exemptions, or even straight up elimination of property taxes is actually being considered in more than one state. So today on the show, we’re diving into it. What’s been happening, what some of the proposed solutions are, which ones might actually pass, and how this could all impact you. Let’s get to it. So first up, let’s just talk about the numbers. Big picture, how much have property taxes actually risen in the United States? I’m guessing if you’re already an active investor or a homeowner, you know the answer and it is a lot. I’ll break it down for you, but the national median annual property tax bill, so if you averaged everything in the country, what’s going on right now is that from 2019 to 2023, we saw a 23% increase in property taxes that went from about 2,500 bucks to over $3,000 a year, at least according to NAR.
Now, if you actually pull out condos and attached and you just look at single family homes, the average bill reached 4,300 bucks. That’s up 6% in just a year. So it’s still growing faster than the regular pace of inflation. And if you extrapolate that out to duplexes, triplexes, fourplexes, commercial insurance, all of that is going up as well. So really, no matter how you look at it, taxes are going up a lot. And this is impacting everyone, all sorts of people. You hear a lot about older folks on fixed income being hit particularly hard, but I think this is just across the board. It is increasing homeownership costs. So why is this happening? Well, the answer is actually not that complicated. This is actually a pretty simple thing to figure out, but basically home prices went up. If you look at the period of time from 2019 to 2024, where taxes on average went up 27%, home prices during the same exact period of time went up 50%.
And so based on the way tax policy works, when your home value goes up, your assessed rate goes up. And so your taxes go up because the way that property taxes work for pretty much everywhere in the United States is you kind of have two variables. One is the assessed value of your home. How much does the county or local government think that your property is worth? And then the amount that they tax that. The average across all states is about 1% of that assessed value per year, but that actually ranges anywhere from about 0.4% to 2% per year. And so what we’ve actually seen over these last couple of years is that tax policy has not really changed. If you look at the effective tax rate, again, that percentage of the assessed value, that has actually been relatively stable. It’s actually declined in some markets.
So what’s causing the increase in taxes is because appraised value has gone up. Now, fortunately, research shows that for every dollar that your property increases in value, your property insurance doesn’t actually go up proportionally. It only goes up about 0.3 to 0.5% for every 1% increase in property value. So that’s actually good because you’re building equity faster than your taxes are going up. So I want to just put this in the big picture. If you are a homeowner, if you’ve owned your property for a long time and you have seen your taxes go up, you’re probably still a net winner because your equity has grown so much that your net worth, if you’re judging it just by your total net worth, you’re still ahead. But where the problem comes in is cashflow, right? Because your equity that you’re growing is not money that’s coming into you every month.
And as an investor, that’s a consideration. But I think it’s even more of a challenge for homeowners because they’re usually not making money off their properties, but their taxes are going up. So that means more money each and every month or each and every year is going out of their paycheck or out of their pockets and towards property taxes, even though their home equity probably has gone up. So just keep that framing in mind. But just to sort of summarize what we’re talking about here, big picture stuff, there hasn’t been some big shift in tax policy. It’s just that home prices are way higher and so assessed values are up. But as with everything in real estate, it is super regional how much you pay. Tax policy is very different, not just depending on state. A lot of property taxes are implemented at a county or local level as well.
So where you live is really going to tell you what that effective rate is. Are you on the low end of 0.4% per year? Are you on the high end of 2% per year? It makes a super big difference. The highest effective tax rates, at least as of 2024, and I do not think they’ve changed. This is just the last month I could find data for. Illinois is at the highest effective rate at 1.8%. And we have New Jersey at 1.64, Texas, Nebraska, New York are also up there. Those are just in terms of the percentage that you pay. And I’m sure you can imagine that the two highest property tax, if you just figure out the total dollar amount, it’s New York and New Jersey because one, the home values are really high there and they also have really high effective tax rates, so no surprise there.
In Jersey, the average tax per year is nearly $10,000. In New York, it’s actually much lower than Jersey. It’s about $7,500, still a ton, but way lower than 10 grand in Jersey. Now, that shouldn’t be surprising. Those places have had expensive taxes for a long time, but I think what we’re talking about today where there’s kind of this just revolt where people are pissed straight up about property taxes. It’s because a lot of places that traditionally have not had high property taxes are now seeing them. So since 2019, Colorado has seen the fastest property tax increase, 53%. I invest there. I can tell you, historically, property tax is very low there. And although the assessed value hasn’t changed, 50% increase in your taxes is going to raise some eyebrows, right? We also see Georgia at 51%, Florida at 47%, and a lot of other Sunbelt states basically where price appreciation has been so rapid, that’s where the total dollar amount you’re paying per month is going up the fastest.
Now, if you’re curious about the lowest, Alabama, totally in a league of its own. Alabama just says, we’re not basically going to tax property. 0.37 is their effective tax rate, super, super low. We also have South Carolina, West Virginia, Delaware, Idaho, Nevada, Arizona are the ones that are really low, sort of near that 0.5%, much, much lower. So things are going up, but how does this tie into the total cost of homeownership and how does it impact the ever important stat that we talk about all the time on the show, housing affordability? Well, in 2025, the average US homeowner, again, is paying something around $3,500 per year in property taxes. That’s about 300 bucks a month and has to fit into the escrow payment that people are paying alongside their mortgage, which is principal and interest and alongside insurance. If you also have an HOA, you’re paying into that as well.
And so that is pretty significant, right? The average mortgage payment in the United States is about 2,800 bucks right now. So the $300 is a pretty big portion of that that is more than 10% of your total mortgage payment or I could just tell you off the top of my head, back in the day it was, I don’t know, it was probably like four or 5%. So it definitely has increased that. And that obviously comes out and impacts people on their monthly basis. But the other thing that I think a lot of people miss in this situation is it also is pulling people out of the housing market because for mortgage qualification purposes, lenders have to consider property taxes into debt to income calculations. If you go to get pre-approved, they’re going to be thinking about how much you pay in taxes and what you can afford.
And because taxes have risen so much, that means fewer people can qualify. The amount that people can qualify in terms of purchase price is going down because taxes are replacing that within the total calculation. And this can reduce demand, right? People are going to buy less. Just as an example, a buyer who’s looking to get qualified at today’s rates, 6.5% or whatever, in a state like Illinois or New Jersey. So I’m giving you an extreme example because these are the more expensive states in Illinois and New Jersey. If you are looking at this, they’re basically penalized six to $800 per month in property taxes versus a comparable home in a low tax state. So that alone is essentially the equivalent of having one full percentage point on your mortgage added to it, right? So instead of going to Alabama, if you’re living in New Jersey, that’s the same thing as basically saying, instead of having a 5.5 mortgage rate, I’m going to a 6.5 mortgage rate.
That is how much it impacts housing affordability. That is really significant. Or just put it another way, right? If you moved from Illinois to Alabama for a average price home, let’s call it 400K, that actually saves you roughly $6,760 per year or over $560 a month. And honestly, that can be the difference for a lot of people, the difference between qualifying and not qualifying for that mortgage. So yeah, this stuff really matters for the housing market. Another thing that it’s impacting as well is it kind of just adds on to the entire lock-in effect because now longtime homeowners who are sort of locked into low mortgage rates now face a second reason not to sell, right? They don’t want to give up their assessed value. Now, different states have different rules about assessing value. Some do it every year, some do it two years, some do it five years.
There are actually states like California, or now there’s a new law in Georgia that does this, that has assessment caps, meaning that not only are these homeowners in a state like Georgia or California locked into a lower mortgage rate, they are locked into a lower tax rate. So selling and moving somewhere else doesn’t just mean resetting your mortgage. It also means resetting your tax rate and that’s going to go up too. So another reason we’re seeing low inventory, it creates a powerful, sustained, disincentive to sell, right? People do not want to sell if they’re going to go move to an equivalent house and pay way more. We’ve been seeing that with mortgages for years, and I think we’re going to see it with taxes for the foreseeable future as well. Before we move on, I just want to mention one other thing that this is also impacting renters because often those costs get passed through to tenants in the form of higher rents.
And so it’s not just homeowners that are being effective. This is just raising costs throughout the economy. This is one of the things that just contributes to inflation. So it’s affecting everything across the board. Before we move on and sort of just talk about what states are doing about it, because I think this is really fascinating. I just want to mention that we had a guest on the show recently, Mike Simonson, he’s been on the show many times, really great housing market analyst. He mentioned something to me that you might’ve picked up on. He said that in states where there are higher property taxes, housing prices are suppressed and it actually makes housing more affordable. And I actually looked into it and actually he cited it and I sort of dug into this, but there was a paper, some research study done by the Minneapolis Federal Reserve.
And what they found is that higher property taxes can actually improve housing affordability, particularly at the entry level because they suppress purchase price, right? They keep prices down because there’s this other price going on that people have to contend with. So just look at Texas, right? They have a very high effective tax rate, 1.7%, median home price there is just 240,000. And so there is some research into that. I just want to call that out because people assume high tax states, there’s no benefit to that, but affordability is a benefit, right? You’re paying more tax, but you are paying less in your principal and interest. That’s what this Federal Reserve paper is saying is that when you look all told, high tax is not necessarily a bad thing. Now, if you’re in a state like New Jersey, kind of hard to argue there’s anything really good going on there, right?
You have high property values and property taxes, but when you look at the big picture, that is sometimes the effect, at least according to this paper. So I just wanted to call that out before we move on. So far, we’ve talked a lot about just general big picture stuff, houses impacting homeowners, affordability, but let’s talk about what this means for investors specifically. We do though, we got to take a quick break. We’ll be right back.
Welcome back to On The Market. I’m Dave Meyer. We’re here today talking about the great property tax revolt that is shaping up in the United States. Before the break, we talked about just how this is impacting the housing market in general, but I want to turn and just mention a couple quick things about how higher property taxes impact investors specifically before we get to the states that are really trying to curb this and what they’re actually specifically doing into it. So one thing is basically property taxes are factored into home values, meaning high tax areas produce lower purchase prices and low tax areas produce higher ones. Look at California, lower property taxes, higher prices. Jersey, New York, kind of an exception to that rule, but there are 50 states so we have to look at everything and the research shows that this is generally true.
This means, and pay attention to this because we’re going to talk about states that are potentially lowering their tax rates. This means, according to the research, that a reduction in property taxes does tend to boost home values, right? If a state is going to lower their property taxes, that can boost home values. As an investor, that is something you should be thinking about as we talk about what the states are doing in just a minute. On the other side though, that also means that raising taxes can dampen appreciation, which is why some economists argue high property taxes have kept its housing market relatively more affordable than sort of the growth that they’ve seen that the population growth, the business growth, the job growth would otherwise suggest. So again, a lot of this is academic, but I do just want to share this with you because we’re talking about states really changing their policies potentially.
And this could really impact prices in those markets. Now, of course, there are other things investors should be thinking about like just total demand, right? Market desirability. If there’s a really high tax environment, less people might move there. Or if you’re in a really high tax city trying to flip a house during an affordability stretch time, that could impact you. Of course, also you’re going to want to think about underwriting your taxes as an investor. You should be looking at how frequently your taxes get assessed. I think this is something a lot of new investors really miss. You say, “Oh, the taxes aren’t that bad.” But there’s states like Connecticut, for example, they have a five-year assessment period. In Connecticut, they haven’t assessed in several years, but that market is booming. Prices have gone up like 30%, 40% in the last five years. I think they’re reassessing this year in 2026.
So when they do that, property tax is probably going to go up 10, 20%. This is something you need to be paying attention in underwriting, and hopefully that makes sense to everyone. Don’t just take taxes for what they are today, understand tax policy in the places that you’re buying and project that forward for your own underwriting. All right, enough with the big picture stuff. We’ve done the history now. Everyone understands what’s happening with taxes, why this matters, and what might happen if a state changes their tax policy. So let’s talk about it. What is actually happening at the state level? Well, as of early 2026, there are at least, it’s kind of hard to get this information, but there are at least 12 states that are actively weighing proposals to eliminate or limit or reduce property taxes in some way, shape or form. If you’re wondering what those states are, they’re Florida, Texas, North Dakota, Indiana, Georgia, Wyoming, Kansas, South Dakota, Ohio, Illinois, Pennsylvania, and Michigan.
Now, just politically, these do tend to be Republican-led initiatives, but we’re actually seeing bipartisan support for these ideas in a lot of these states. So what is actually being proposed here? Because I think most people have seen this stuff in Florida. We’ll get into that where they’re just saying, “We’re going to eliminate it. ” But there’s a very big spectrum of what is actually being proposed. The approaches range from modest adjustments all the way up to those full elimination. And within that, there are five different buckets of ideas that are being proposed. So the first is assessment limitations and caps. Again, assessment is just basically when the government, the local government, goes out and decides what they think your home is worth, and then they tax you based on that. So one of the idea is limiting how much that assessed value can go up in a given year.
They’re basically saying they’re going to cap the annual growth of assessed values. California has this. They’ve actually capped it at 2% per year. Remember I was saying, this is why Californians tend to be locked in, right? California home prices over the last 10, 20 years have gone up hundreds of percent, but every single year, their taxes are only going up 2% max. So they have disproportionately low taxes compared to their home value. So that is what’s going on in California. Georgia actually just did something as well where they are linking the amount that they can increase assessments to inflation. So in inflation index, this is actually common. When I was living in Europe, this is sort of how they did it, not just for taxes, but for rents as well. So this is something that you see in other parts of the world. Georgia just implemented that, something like that.
But basically, this is being proposed in a lot of states. The idea here is that it protects existing homeowners. I will say it kind of shifts the cost burden to new buyers and to commercial properties. So this is not like a free lunch here. We see that in California or in these other places, but it does help existing incumbent homeowners. And you could argue, I think correctly, that it probably hurts home buyers in commercial property values disproportionately. So probably going to be very popular with owners, like boomers, right? They got all the money anyway and they want to keep it, but probably not that popular with young people who want to get into the market or people who are trying to build their portfolio. The next bucket, that was assessment caps. There’s next something called a levy cap. This is kind of similar, but it’s a little bit different in an important way.
It basically caps the total annual revenue growth of the property tax total. So it basically says, if you’re in Youngsfield, Ohio, I don’t know why I just picked that. Youngsfield, Ohio, right? And your total property tax revenue is a million dollars. It must be way more than that, but I’m just going to say a million dollars. They’re going to say next year, the most it can go up to is $1.1 million. Because that assessment cap disproportionately helps existing homeowners and kind of hurts new homeowners. The idea here is that this is a more equal way to limit property taxes and to spread the tax burden across existing homeowners and new homeowners alike. So that’s a popular one gaining some steam. The third bucket is the homestead exemptions. You might live in a state. A lot of states already have this, but this is basically a lot of states are saying, we’re going to reduce the assessed value of primary residences by a fixed amount.
So Texas has done this. Indiana is working on a system like this. I know Michigan has homestead exemptions. And this is something that is going to negatively impact investors, but help primary homeowners. And whether you like this or not, just going to say, I do think this one is going to be popular because it is a way that you can make homeownership more affordable for local residents than investors. It’s relatively cheaper for a resident to buy a home than an investor. And that’s a way to sort of equal the playing field without banning investment altogether. So just want to call off, there are trade-offs there, but my guess, homestead exemptions are going to become more and more popular, or at least homestead reductions in the assessed value. So that’s something to definitely keep an eye out for. The fourth bucket is rate or credit reduction.
So this is basically like applying a credit statewide against property tax bills is similar to other types of tax credits. North Dakota has a really interesting example of this. I’m going to talk about that in a little bit, but they have a primary residence credit, super interesting thing that they’re doing in North Dakota. So we’re going to talk about that in a minute, but I just want to get to the fifth bucket, which is tax swaps, basically replace property tax revenue entirely with something else. So the tax state says, we’re going to either lower property taxes, we’re going to get rid of it, and we’re going to place it with another kind of tax. That’s basically either sales tax, increase sales tax or add an income tax, increase the income tax. So these are options. They’re controversial because you’re just taking taxes from one place and putting them somewhere else.
So people argue and say that this could shift costs towards consumers or renters. Now, I’m not sure this will go anywhere. The full elimination proposals that are out there sort of fall under this bucket because people are saying that they’re going to just get rid of property taxes are saying that they are going to fund that, replace the income through some combination of maybe state surpluses, sovereign wealth funds. We’ll talk about that, what that is in just a minute, and other taxes like Florida and North Dakota sort of have the most advance of these ideas. But I’ll just tell you, these are really bold ideas and I’ve done the math and I don’t know if it really makes sense because basically where does the revenue go? If you just ask people, “Hey, do you want to get rid of property taxes?” Of course, everyone is going to say yes, no one likes paying taxes, right?
But property taxes are not just like some random thing that you pay. They’re in many ways the financial backbone of local governments. So not just states, but cities and counties as well. Property taxes actually fund about 90%, 90% of local school district revenue, so these pay for schools. They account for roughly 70% of all local government general revenue. So not just schools, firefighters, roads, police, all of that. 70% of it. When you factor in states, it’s about 25% of revenue nationally. And so this stuff really matters, right? The total amount collected in property taxes in the United States in 2024 was about $800 billion. And so in just the most extreme example, if you just eliminated that, that’s a lot of money for states. I know where we are with the federal government right now, 800 billion doesn’t sound that much, but if you look at state budgets, 800 billion is a lot of money.
And so every elimination, every proposal to reduce property taxes has to answer the question, what replaces this revenue? And that’s where that tax swap bucket I was just talking about comes in. And the typical answers that you hear are either higher sales tax, you hear state general fund transfers, like they have surpluses, higher income taxes, or a reduction of spending and services by state or local governments. You either have to raise revenue somewhere else or you have to spend less. And so as we talk through the proposals that are out there, just remember that there are implications for these. Some of them mean you’re going to be paying the same, it’s going to fall into a different tax bucket. Some of it means that local services and spending by your government might go down. So those are the buckets. Let’s talk about some of the policies that are actually being proposed and sort of where they are in the legislative process.
We got to take one more quick break though. We’ll be right back.
Welcome back to On the Market. I am Dave Meyer. We’re getting into the proposals that are actually moving. We’re going to deep dive into a couple of states and what they’re actually proposing. So Florida, kind of the boldest experiment, I think everyone kind of knows about it. It’s been in the news a lot, but basically what’s been going on is Governor of Florida, Ron DeSantis, has made eliminating property taxes on primary residents. So again, those are like those homestead properties. A big priority of his. This is a big political priority of his. It’s also a campaign year. And basically what he wants to do is reduce property taxes only on primary residence. Notably in Florida, vacation homes, investment properties, commercial real estate. For some reason, if they’re non-homesteaded properties, those would all still have property tax. And this is gaining steam. The proposal actually passed the Florida House of Representatives by a lot 80 to 30 in early 2026, but the bill sort of died when it hit the Florida Senate.
They’re actually revisiting this in just literally, I think next week, April 20th, when the Senate is going to introduce its own bill. I read about it a little bit. It’s apparently less generous. It’s not a straight up elimination. So it sounds like something will probably pass in Florida, but it’s not likely to be the full elimination. Apparently the Senate is not down for that. And even if that passed, you would need a constitutional amendment, you need 60% of voter approval. That would come in November 2026. So this is real, right? This is a serious proposal that could pass in Florida. So what does it mean? Well, Florida collected roughly $55 billion in property taxes in 2024, funding about 18% of all county revenues and eliminating non-school homestead taxes would cut local government revenues by an estimated 14 billion in the first year, 18 billion in subsequent years.
Now, Governor DeSantis argues that the state’s budget can cover it. They have a surplus, that is true. They’re saying they’re going to improve efficiency and that can cover the gap. But I will say, when you look at independent nonpartisan analysis of this, the math doesn’t really add up. They say that eliminating property taxes in Florida entirely would require raising $43 billion, so not enough because their surplus is five to eight billion. You’d need 43 billion, that’s roughly $2,000 per people to maintain public services that are currently funded in Florida. Now, there are some more modest bills that are being proposed probably because of this gap. That’s probably, like I said, the Florida Senate is going to sort of be a less generous bill, probably because this gap is too big. Just as an example, these independent analysts say that to compensate for the bill that passed the house, they would have to double the sales tax.
It’s currently at 6%. It would go to 12%. That would be one of, I think, if not the highest sales tax in the entire country. So this would probably help homeowners because they wouldn’t be paying those property taxes. They would be impacted by the sales tax. But you’re sort of shifting a lot of the cost burden to lower income folks. That’s what all of the research shows is that when you have a higher sales tax instead of property tax, lower income people are disproportionately taxed higher than wealthier people. And so if this passed, and this again, this is just an example, but if you decided no property tax, because Florida doesn’t have an income tax, you’re not doing that, you would have to basically double the sales tax that would really just be shifting the cost burden. Or the other option is to cut services, which might be what they are planning.
But either way, if this does pass, I think this would matter. The Florida housing market is suffering. And I do think this would really matter. Florida would become the only state in the country. It would have neither income tax nor property tax on primary residences. And the same independent analyses, nonpartisan, they estimate that this could add four and a half to 9% boost in property values. That’s a lot. That maybe wouldn’t get them back to their 2022 peak, but that would help a lot in a market that is really struggling to find its footing. And so if you’re looking to buy in Florida and this thing passes, now I don’t know if that’s going to happen in year one because we’re in a weird time with housing affordability, but long term, four and a half, 9% increase in home values, especially if you’re using mortgage, if you’re using leverage, that is a significant return on investment that is something to consider.
Now remember, investment and rental properties still would be taxed, but there is this idea that just there would increase demand. So if you were flipping, for example, or if you were to go and sell your rental property to someone who has the homestead exemption, then you could benefit from that increase in value. So that is something to remember. The other thing to keep in mind though is that there is potential for service cuts or fee shifts. The analysis I’ve read call out the idea that you could see, for example, public safety decline because if they cut the fire department or police services or something like that, that can negatively impact home value. So you need to be looking at both of these things. But generally speaking, most of the analysis I’ve seen show that if something like this does pass in Florida, it will probably be a tailwind to home prices for the next couple of years.
So that’s what’s going on in Florida. Next, let’s talk about North Dakota. I think this is one of the more fascinating ones. So basically what happened is the governor, Kelly Armstrong, laid out a phased decade long path. So they’re not doing it overnight. This is a decade long path to eliminate property taxes for most homeowners. And they’re funding it in a really unique way. Through the earnings from the state’s $13 billion C legacy fund. So basically they have a sovereign wealth fund in North Dakota. They have taken a lot of their oil and gas revenue. They have collected it as a state and invested it. And it is a fund for an interest earning, a ROI earning account for the entire state of North Dakota. And what they’re saying is that they’re going to fund property tax reductions through this fund. They’ve already enacted what they call the primary residence credit that offers up to 1,600 bucks per household in property tax relief for 2025 and 2026, funded entirely 100% from legacy fund earnings.
So local governments not losing revenue, right? I mean, I think this is pretty cool. They invested their money, they’re taking it, and they’re investing it back in the people who live in North Dakota. I think that’s pretty cool. Roughly 50,000 North Dakotan households, about 30% of all people had their entire property tax bill zero out for them in 2025 because of this program. They’ve also, back in 2025, capped annual local property tax budget increases to 3%. And so they are really making significant progress here. And I think it’s a cool model, right? They are not raising other taxes. They are not cutting services. They are just making money off of their sovereign wealth fund and they’re reinvesting it in the people of North Dakota. Now I want to call out, I think this is probably only possible in smaller states like North Dakota. They have significant oil wealth.
They have this big fund that is expected to grow. And so it probably can’t work anywhere, but I think this is a cool use of that sovereign wealth for a state like North Dakota. Maybe other smaller states might be able to do this as well. I’ll quickly go through two other states, Indiana and Texas that are making major stuff. So Indiana, they actually passed a law. It’s the biggest property tax reform in nearly 50 years. It’s projected to save homeowners in the state $1.3 billion over the next three years. Basically what they’re doing is a 10% homestead tax credit. Remember, we talked about that before starting in 2026, and they’re phasing in increases in the standard homestead deduction. Eventually, they’ll just be taxed on 25% of the assessed value by 2031, and there will be even bigger credits for seniors, veterans, and disabled residents. All told, two thirds of Indiana homeowners are expected to see a lower 26 property tax bill than their 2025 bill.
So that is real relief. But as with Florida, and unlike North Dakota, which really I don’t see many trade-offs, there are trade-offs in Indiana, basically revenue, right? Marion County, as an example, is projected to lose $43 million in revenue in 2026. That is basically the majority of the school budgets there. Businesses, commercial properties, large rental property owners. So all investors take note of this. They’re not getting the same relief. And in some cases, their effective rates might be going up. So you might see higher taxes in Indiana on rental properties and investment properties because of these cuts to homestead properties. Now, it’s not all. Some rental properties actually will see deductions, potentially significant ones, but those haven’t been phased in yet. They’re going to get phased in over the next couple of years. Last state we’re going to dive deep into is Texas. So they’ve basically just been making incremental plans.
They pass little bills here and there. They haven’t done one big comprehensive thing like these other three states. They’ve increased the homestead exemption to $100,000 up from $40,000. Voters with disabilities or over 65, they receive an even bigger exemption up to $200,000. But the governor there, Governor Abbott, has proposed a constitutional amendment for 2026 ballot. So people are going to be able to vote on this to abolish school district property taxes entirely. It’s a $40 billion per year commitment that would require a massive expansion according to every analysis, a massive expansion of sales tax to fund the schools. You’re actually seeing big disagreements within the government here in Texas. Lieutenant Governor Patrick, in the same administration, opposes this idea and says it’s fiscally unworkable. And so Texas is kind of in this cycle where it’s like making incremental progress, but really things haven’t changed that much in Texas.
So those are the big states that I get asked about a lot, but there are other states to watch as well. Wyoming is exploring the elimination being a switch to sales tax funded model. Analysts say that that would cause a revenue reduction of almost $650 million. State government there is saying they’re going to increase the sales tax by 2%. That would not fully offset it. And again, it kind of shifts the burden to lower income people disproportionately. That’s what people are saying about the Wyoming proposal. In Montana, they already passed a tiered property tax system that taxes second homes, short-term rentals, 2% while offering relief to primary residents. I think this is going to be another thing that becomes more popular. We talked about Georgia. They implemented a assessment cap similar to Florida. South Dakota, Kansas, Nebraska, Iowa, also sort of like working through things.
There’s been a lot of proposals, but nothing specific, but those are states to watch as well. So that’s what’s going on. But before we go, just want to talk about what this means for real estate investors. So near term stuff, property taxes almost certainly going to keep rising in most markets, with the exception of some of the ones I mentioned over the next couple of years, because even if property values don’t go up, even if tax policy doesn’t change, a lot of states will have these new assessments, right? The assessed values will catch up from all the appreciation over the last couple of years. And so we are probably going to see higher taxes, but I do think it will slow down. We are not in the COVID period where we had so much appreciation. I do think taxes will start to level out, and in states where they’re starting to limit it, they even could go down in some areas.
But like I said before, if you are buying property, you need to be looking at how frequently your taxes are assessed, when the next assessment is, and how likely it is that your tax bill is going to go up. That is an important part of underwriting in today’s market. The second thing is in the state’s passing major property tax reform could create demand, right? Let’s just be honest. If you’re in Florida or Indiana or North Dakota or Georgia, it could create demand for owner occupants. This lower cost of homeownership, lower carrying costs do improve affordability, and they can help prop up appreciation. Not saying it’s going to go up, but it is a tailwind, right? It applies upward pressure to housing prices in those markets. But remember, most of these relief programs explicitly exempt investment properties, commercial properties. So investors in these states like Florida, for example, they’re going to continue paying full tax while they’re owner-occupant competitors, right?
If you’re doing a house hack, for example, potentially pay none. And this is a structural shift in the competitive landscape. You’re going to have more competition from regular homeowners for a single family home or for a small multifamily in these states because they pay less than you, right? They have an advantage over investors in these states. So there is a risk reward here in any of these markets, something that you should be thinking about. So that’s what’s going on. I’m really curious what you all think about this. I’ve read a lot about this. I think there’s some interesting proposals. I think there’s some kind of crazy proposals out there that are really sort of ignoring some of the budget problems that they could create, but I’m curious what you think. What do you think about property taxes, how much they’ve gone up, and what should be done about it?
Please, if you’re watching this on YouTube, let me know in the comments. I would love to hear what the on- the-market community is thinking about this. That’s what we got for you today. I’m Dave Meyer for BiggerPockets. I’ll see you next time.