Every year, thousands of UK residents decide to relocate to the US to create their own version of the American Dream. Many others look to invest in property in the land of opportunity and enjoy a potentially lucrative rental income. However, before buying property in the USA, it’s important to understand how property taxes in the US work, especially for UK buyers, who may face different rules and obligations compared to domestic owners.
The popularity of the US should come as no surprise. This large and diverse nation offers a dynamic property market with few restrictions on foreign ownership, though US property tax laws can vary widely by state. But before you get started, you’ll need to be aware of the property tax in the area and its implications for your investment.
In this guide, we’ll walk you through the key US property taxes to be aware of and what they mean for your American adventure.
The guide will talk about:
- The difference between UK and US property taxes
- The way states treat taxes differently
- Calculating and managing your US property taxes by state
It’s important to remember that this guide is intended for UK tax residents only. The US operates a ‘substantial presence test’, which means that if you spend extended periods of time in the US, you could become a US resident for tax purposes. For more information on what to consider if you become a US resident for tax purposes, you can visit the US Internal Revenue Service (IRS) website.
This guide is written exclusively for UK residents wanting to learn more about property taxes in the US and will not cover the implications of being a US tax resident.
The difference between UK property tax and property taxes in the US
There are two main types of taxes to consider when buying a property in the US.
1. One-off taxes when buying property:
Property transfer taxes are US property taxes levied by a state or local government to complete the sale of a property. The amount you pay is usually based on the value of the property and can vary between 0% (some states don’t charge transfer tax at all) and 4%. Who pays the transfer tax depends on the state. In some states, the seller covers the cost; in others, it’s the buyer’s responsibility. In certain states, the tax is split between the parties.1
| State | Typical rate | Who pays? | Notes |
| Florida | 0.7% across most of the state, referred to as the ‘documentary stamp tax’.2 | Usually, the seller, unless agreed otherwise.2 | In Miami-Dade County, the rate is slightly reduced to 0.6% for single-family homes.2 |
| New York | An effective rate of 0.4% + 1% for properties in New York City.3 | Typically the seller, although this can be negotiated.3 | Extra charge: A mansion tax of 1% or more applies to homes above $1 million.3 |
| California | Varies by city and county. There’s no statewide standard. | Typically the seller | Some cities like San Francisco have progressive rates that can go as high as 6% for very high-value properties.4 |
These rates vary by State and County and were accurate as of the day this was published.
2. Ongoing taxes when you own a US property
You’ll have to pay an ongoing property tax in the US on your home and, again, the amount varies by state and even county (counties are subdivisions of states). As a general rule, expect to pay between 0.3% and 2.5% of the property’s value on an annual or semi-annual basis.5
If you intend to rent the property out, you’ll have to pay federal income tax on the income generated from property. This ranges from 10% to 37%, depending on your earnings, although you can deduct certain expenses.6
In addition, some states charge a state income tax on top of the federal tax.
Council tax vs property tax
You can think of property taxes in the US in the same way you think about council tax in the UK. They’re both annual local taxes on the value of property.
The main difference with the US system is that it varies incredibly across the country, with rates and rules changing from one state or county to the next. Some states also operate a “homestead exemption”,7 which reduces the tax on property used as a primary residence.
US property taxes by state
One thing that can’t be emphasised enough when discussing property taxes in the US is the role of states. Property tax rates vary widely from state to state, and states calculate them in different ways.
Local governments in the US rely heavily on property taxes to pay for local services, so state law and political priorities can impact rates. In the table below8, we show the spread of property tax rates across three states.
| State | Property taxes as % of housing value |
| California | 0.70% |
| Florida | 0.74% |
| New York | 1.26% |
These rates vary by State and County and were accurate as of the date this was published.
You need to make sure you have enough money to pay your US property tax, and you’ll be required to file a property tax return every year. Although property taxes change from year to year, the change is usually not significant. Once you have a general idea of tax levels in your area, consider putting a little aside on a weekly or monthly basis.
Tax considerations for UK buyers generating income from property in the US
As well as state property taxes, there are two other factors that will impact your tax bill if you plan to rent out your US home.
The UK-US double taxation treaty
The UK and US operate a double taxation treaty, which helps to ensure you don’t end up paying income tax twice, once in each country. In terms of property, the treaty is relevant if you intend to earn rental income, or if you intend to sell the property in future.9
What usually happens is that, if you pay income tax on earnings in the US, you’ll get tax credits to cover any UK income tax due.
Reporting requirements for US rental income
If you’re a UK resident renting out a property in the US, you’ll have to report the income to both the IRS in the US and HMRC in the UK. Use Form 1040-NR in the US and SA106 in the UK.
Taxes can be complicated, so working with an expert in UK and US tax law will help to make sure you always remain compliant.
If you’re sending money abroad, a currency advisor can ensure fast, convenient and cost-effective transfers.
Calculating and managing your property tax in the US
How much you’ll pay in property tax is assessed annually. First, a local tax appraisal or assessment board will value your home, usually on the basis of current market conditions. This means that if a lot of people want to buy homes in the area, your property tax bill may rise.
The local government will then set the tax rate based on the income the buyer needs to provide local services.
Exemptions, deductions and appealing your US property tax rates
US property taxes have their own exemptions, including the homestead exemption mentioned earlier. This can lower your tax bill. There may also be exemptions for homeowners over 65, homes using renewable energy and property used for agriculture.10 You’ll need to research applicable exemptions and deductions in the state you intend to buy in.
You’ll get an annual property tax statement outlining what you need to pay and how it was calculated, along with any exemptions. If you think your assessment is too high, you can appeal the valuation with the local appraisal district. You’ll need to provide evidence to back up your claim, often including:11
- Photos of the property
- Sales data and local real estate listings show that similar local properties have lower values
- Property surveys and repair estimates
You may also need to present your case in front of the board, though you can pay for a specialist to do this for you.
Deductions when renting out property
If you’re renting out your US property, a number of income tax deductions are commonly available. These include interest deductions for mortgages and property management costs, including cleaning and advertising.12
Opportunities and challenges for UK buyers facing property taxes in the US
The US is an exciting and dynamic real estate market with a welcoming attitude to overseas buyers. In addition, a high quality of life and abundant career opportunities attract foreign investors who want to live in the country more permanently.
But non-compliance with US property and income taxes are a significant risk for those who are unprepared for the country’s dual system of government, where state and local governments wield considerable power. If you’re looking to buy a home in the US you should research property taxes in the state where you intend to live, seek professional tax advice if you intend to rent out your home, and plan ahead for potential market changes that might impact the amount you pay.
Frequently asked questions
How much is property tax in the US?
Property tax rates in the US vary by state, county, and municipality, but on average, homeowners can expect to pay around 0.8% to 1.1% of their property’s assessed value each year. In some states, like New Jersey and Illinois, rates can exceed 2%, while others, like Hawaii, remain below 0.3%.
How do property taxes work in the USA?
In the US, property taxes are collected locally and used to fund services like schools, emergency services, and infrastructure. Each county or city assesses the value of a property annually or biannually and applies its local tax rate (known as the mill rate) to that value to calculate the amount owed. Taxes are typically paid semi-annually or annually.
Which states in the US have no property tax?
All US states charge some form of property tax. There are no states with zero property tax. However, some states, like Hawaii, Alabama, and Colorado, have comparatively low effective tax rates, which can be appealing for property buyers seeking lower holding costs.
Can I buy property in the US as a UK citizen?
Yes, UK citizens can legally buy property in the US. There are no citizenship or residency restrictions, though you’ll need to navigate the local legal process, secure a US-based bank account for transactions, and possibly appoint a legal representative or property manager. If you’re not planning to live in the US, it’s also important to consider how rental income and local property tax will be handled.
How to avoid double taxation in the US and UK?
The UK and US have a double taxation agreement (DTA) that helps prevent you from being taxed twice on the same income. For example, if you earn rental income or capital gains from US property and pay tax in the US, you may be able to claim tax relief in the UK through a Foreign Tax Credit. However, rules vary depending on the income type and personal circumstances so it’s wise to consult a cross-border tax advisor.
What happens if I don’t pay my US property taxes?
If US property taxes are not paid, the local government may impose late penalties, interest charges, and eventually place a tax lien on the property. In severe cases, the property could be seized and sold at a tax auction to recover unpaid amounts. It’s important to stay up to date with local tax obligations—even as a non-resident owner.
Can I claim UK tax relief on US property taxes?
Generally, US property taxes are not directly deductible from your UK income tax bill. However, if you rent out the property, you may be able to claim them as a deductible expense when calculating taxable rental income on your UK self-assessment return. Always speak to a tax adviser for tailored guidance.
Are there any special considerations for UK expats?
Yes, UK expats who own US property should be aware of potential US estate tax exposure, the impact of currency fluctuations on returns, differences in tax year and reporting between the two countries, and how UK domicile rules might affect inheritance planning. Given the complexity, it’s wise to consult professionals experienced in UK-US cross-border tax matters.
Lumon: Helping you simplify your overseas property purchase
Navigating property tax and payment obligations in the United States can be challenging, particularly when sending money abroad. Lumon specialises in helping you manage the currency aspect of your property purchase, ensuring your international payments are secure, hassle-free and aligned with your financial objectives.
Our service is built around your needs, offering relevant market insights and bank-beating exchange rates. Your dedicated currency specialist will guide you every step of the way, helping you get great value when sending money to the US.
When you buy
Forward contracts – Lock in an exchange rate in advance, so you know exactly how much your property purchase will cost in Pounds when it’s time to transfer. Whether you’re securing the price of a home or planning ahead for a sale, this gives you certainty in a fluctuating market.
Experienced personal account manager – Your dedicated account manager will help you build a tailored currency strategy so you can approach your purchase with clarity and confidence.
After you buy
Online account access – Set up your online account to take control of your ongoing property-related payments, including insurance, maintenance fees, or tax obligations, whenever you need, in just a few clicks.
Get in touch – to learn more about how we can help you manage your international payments when buying or owning property in the United States.
Sources used:
- Bankrate – The rules of real estate transfer taxes
- Florida Department of Revenue – Documentary stamp tax
- Official website of New York State – Real estate transfer tax
- Centre on Budget and Policy Priorities – States should enact, expand mansion taxes to advance fairness and shared prosperity
- Tax foundation – Property taxes by state
- IRS – Federal income tax rates
- Government of Georgia – Homestead exemptions
- Tax foundation – Property taxes by state
- IRS – US/UK tax treaty
- Government of Texas – Property tax exemptions
- Government of Illinois – Assessment appeals
- IRS – Real estate income and deductions
Sources last checked on 26/06/2025
The information provided is for general information purposes and does not constitute legal, tax or other professional advice from Lumon, and it is not intended as a substitute for obtaining advice. It is recommended that you seek professional advice from a financial advisor or any other professional.
