Understanding Property Taxes
Factors that Affect Property Taxes
The market value of a property may change.
- Each parcel of property is assessed at least once every five years and a sales ratio study is done to determine if the property is assess similarly to like properties. If not, the Commissioner of Revenue may issue an 'order' that would affect the taxable value of a parcel.
- Additions and improvement made to a property generally increases its market value
The market value of other properties in your taxing district may change, shifting taxes from one property to another.
- If the market value of a property increases more or less than the average increase or decrease in a taxing district, the taxes on that property will also change.
- New construction in a taxing district increases the tax base and will affect the district's tax rate.
The state general property tax may change.
- The state legislature directly applies a State General Property Tax to commercial/industrial and season/recreational property classes.
The city budget and levy may change.
- Each year, cities review the needs and wants of their citizens and how to meet those needs and wants. This is called 'discretionary spending' in the city budget. Also included in the budget is non-discretionary spending which is required by state and federal mandates and court decisions and orders.
The township budget and levy may change.
- Each March, townships set the levy and budget for the next year.
The county budget and levy may change.
- Each year, counties review the needs and wants of their citizens and how to meet those discretionary needs and wants. In addition, also included in the county budget is nondiscretionary spending which is required by state and federal mandates and court decisions and orders. As much as sixty to eighty-five percent of the county expenditures are used to deliver mandated services.
The school district's budget and levy may change.
- The Legislature determines basic funding levels for K-12 education and mandates services that schools must perform. On average, approximately seventy percent of school costs are paid by the state.
- Local school districts set levies for purposes including safe school and community education, etc.
A special district's budget and levy may change.
- Special districts such as the Metropolitan Council, hospital districts, watershed districts, drainage districts, etc. set levies to balance their budgets.
Special assessments may be added to your property tax bill.
- Water lines, curb and gutter, and street improvements that directly benefit your property may be funded, in whole or in part, through a special assessment that is added to your tax bill.
Voters may have approved a school, city/ township, county, or special district referendum.
- Local referendums may be held for local government construction projects, excess operating levies for schools or many other purposes.
- Referendum levies may be spread on the market value or the tax capacity of a property depending on process and type of referendum levy.
Federal and state mandates may have changed.
- Both the state and federal governments require local governments to provide certain services and follow certain rules. These mandates often require an increase in the cost and level of service delivery.
Aid and revenue from the state and federal governments may have changed.
- Each year the state legislature reviews and adjusts the level of funding for a variety of aids provided to local governments including Local Government Aid and County Program Aid. The formulas for how aid is determined and distributed among local governments may have changed.
- While direct aid and revenue from the federal government to local governments has declined greatly in recent years, federal revenue continues to be a key portion of the local government revenue stream and that revenue stream may have changed.
The state legislature may have changed the portion of the tax base paid by different types of properties.
- A change in class rates will require a change in the tax rate to raise the same amount of money.
Other state law changes may adjust the tax base.
- Fiscal disparities, personal property taxes on utility properties, limited market value, and tax increment financing are example of laws that affect property taxes.
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How Taxes are Calculated
The Records & Revenue Department computes your property taxes by multiplying the value of your property by the total tax rate of the district in which your property is located. Residential homesteads receive market value homestead credit, which directly reduces your property taxes up to a maximum of $304.00. Agricultural properties also receive an credit.
The value and classification of your property is determined by the Assessing Services Department.
Property Tax Refunds
Two refund programs are available to homestead property owners. Both are through the State of Minnesota:
Regular Refund: Sometimes called the "circuit breaker," is based on your household income and the amount of property tax you pay.
Special Refund: To qualify, your net property tax must increase by at least 12 percent and $100. The special refund is not based on income. For more information or to determine if you are eligible for either of these refunds, read and fill out Form M1PR.
Forms and instructions for the Property Tax Refund are available through the State of Minnesota.
Senior Citizens' Property Tax Deferment
- Is administered by the State of MN
- Must be 65 years old
- Household income is $60,000 or less
- Must have lived in home at least 15 years
- Property taxes must not exceed 3% of net income
- State pays remaining tax as a low interest loan
- Unpaid tax and interest will become a lien on the property
- The lien must be paid at the time of sale
Forms and instructions for the Property Tax Deferral for Senior Citizens are available located below or further information can be found through the State of Minnesota.
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