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The amount Americans pay in annual property taxes varies by thousands of dollars depending on where they live, a Tax Foundation analysis reveals. 

In New Jersey, residents pay a median of $8,797 — the highest of all U.S. states — based on data provided to CNBC Make It. In Alabama, the median property tax bill is only $646.

The varying totals were calculated based on five years of Census data as of 2021, the most recent available.

When looking at the totals for all states and the District of Columbia, the median tax bill was $2,331.

The discrepancy between states is largely explained by differing home prices and property tax rates, which range from an average effective rate of 0.32% in Hawaii to 2.23% in New Jersey, according to Tax Foundation’s analysis of 2021 Census data.

New Jersey faces the double whammy of having the highest effective property tax rate in the U.S. while also having some of the highest home costs in the country. The effect: Homeowners pay a lot in property taxes.

Hawaii has the lowest rate of all states, but home prices are also very high, putting Hawaii closer to the middle of the pack in terms of actual property tax costs.

Property taxes generate 32.2% of state and local revenues in the U.S., the study says. These taxes typically fund schools, roads, police departments, fire departments and emergency medical services.

In states that emphasize local governance at the county and municipal level, property tax bills tend to be higher. This includes New Jersey, New York and Illinois.

Property taxes can also be surprisingly high in low-tax states such as Texas and New Hampshire. These states don’t levy personal income taxes, so they rely more on property tax revenue to fund government services.

It’s worth noting that property taxes can vary widely within a state, with homeowners in urban areas tending to pay more than rural areas, based on higher home values and infrastructure costs.

To calculate median property tax amounts, the Tax Foundation used the median amount of taxes paid for owner-occupied homes between 2017 and 2021, according to U.S. Census American Community Survey data. The data excludes property taxes paid by businesses and renters.

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