Property taxes are taxes on the value of your real estate, such as your home. This type of tax is not collected by the federal government; rather, it is the state, county, city, and other local governments that control property tax. This is why property tax rates and the process of collecting them vary across and within states.
Property Taxes in Minnesota
In the state of Minnesota, property tax rates are slightly higher than the national average of 1.08%, at an average effective tax rate of 1.15%. There are two types of property taxes: levies based on net tax capacity and market value levies. For levies based on net tax capacity, market value exclusions are subtracted from your home’s market value. Once exclusions have been subtracted, the remaining taxable market value is multiplied by your home’s class rate to get net tax capacity, which is the value that your property tax is applied to. The class rate varies depending on the type of your property. For residential homesteads, the rate is 1% on the first $500,000 of the property’s market value and 1.25% on the amount above $500,000. So, if your home is worth $400,000, the net tax capacity is $4,000. Local taxes collected to support ongoing government functions apply to this net tax capacity. So, if your total local rate is 90%, your property tax would be $3,600.
The second type of property tax in Minnesota based on market value levy is typically voter-approved and is applied directly to your estimated market value. For a home valued at $400,000, if the market value tax rate is 0.10%, your additional tax would be $400. This would be added on top of the levies based on net tax capacity. So, continuing based on the above example, your net tax will be $4,000.
In general, residents who live in the home they own, which is regarded as their primary residence, will pay lower property taxes compared to owners of rental properties. This is primarily due to Minnesota’s homestead program for Minnesotans who own and occupy their home. With the homestead program, the taxable market value of properties valued at less than $414,000 are reduced and so, assuming rates stay the same, homeowners pay a lower property tax bill. The homestead program also helps residents qualify for the State of Minnesota Property Tax Refund.
Property Taxes in the Twin Cities – Minneapolis
The city of Minneapolis is located in Hennepin County, where tax rates are among the highest in the state and somewhat higher compared to the national average. The average effective tax rate in Hennepin County is the highest in Minnesota, at 1.31%.
In Hennepin County, the median home value is $245,400 and the median annual property tax payment is $3,213. These are higher compared to the overall median home value and median property taxes in the state of Minnesota, which are $199,700 and $2,296, respectively.
This county offers a reduction in property taxes for qualified veterans with service-related disabilities. A veteran with a disability rating of at least 70% and has been honorably discharged may receive a $150,000 reduction from the market value of their home. If the veteran has a disability rating of 100%, the reduction is doubled at $300,000. To avail of this tax reduction, veterans will have to submit their application through the Hennepin County Assessor’s office or their local property assessor.
If your Minneapolis home is damaged by 50% or more of its value, you may also be eligible for a property tax reduction. To qualify, the damage may have been incurred accidentally or inflicted intentionally by someone other than yourself, from natural causes, vandalism, or arson. The reduction will be applied in the year the damage was incurred or the following year. To apply for your property tax reduction, you will first need to report the damage to your property assessor’s office as soon as possible. Once you have started with the application process, you should not withhold your property taxes as you are awaiting the decision regarding the reduction.
Property Taxes in the Twin Cities – St. Paul
St. Paul, the state capital, also happens to be the seat of Ramsey County. In Ramsey County, property taxes are levied twice in a year, and are higher compared to both the state and national averages. The average effective property tax rate in Ramsey County is 1.30%, while the national average rate is 1.08% and state average rate is 1.15%. Tax rates in Ramsey County vary by city. In Saint Paul, the total local tax rate is around 147%, while the market tax rate is about 0.208%. That total tax rate applies to net tax capacity, which is 1% of the home value (after exclusions) for owner-occupied primary residences.
When it comes to property taxes, several factors come into play. For one, your property’s market value. since the property tax rate is multiplied by this value, its increase or decrease has a direct effect on your tax. The tax levy, on the other hand, is also affected by the city’s decision on the amount of money they would want to raise from property taxes. Property taxes are also subject to legislative changes, approved by elected officials or through voter referendums.
Homeowners whose property “creates energy, enables commerce, or conserves nature,” may be eligible for a complete property tax exemption from Ramsey County. Other exempt property types may be seen on Minnesota Statutes 272.02. If you qualify for tax exemption, you will need to apply for this and submit the required documents to the county assessor’s office. The application review process may take one week to three months, depending on the complexity of the application.
Property Tax Appeal
If you think that the assessed value of your property is unreasonably high, you can appeal your property’s estimated market value with the county by contacting the assessor’s office. If the county decides to proceed, you will be able to get a value adjustment after an appraiser has performed an interior and exterior review of your home.