Homeowners in Minnesota must pay property tax each year to the local taxing authorities. The tax is due installments on May 15 and October 15.
Opening your tax bill can be a cause for shock, if not outrage. But by learning how property taxes are computed in Minnesota, you can investigate whether the assessed value of your home is too high, and the basis of an excessive property tax bill. This article describes the tax assessment process in Minnesota. It will help you determine if the taxable value of your home is higher than it should be. If so, there are measures you can take to have that value reduced. You may be able to knock some dollars off your property tax bill.
How Your Minnesota Tax Bill Is Calculated
In Minnesota, two factors determine your tax bill: the taxable value of your home, and the tax rate (that is, the percentage of the taxable value that the local tax authorities use to compute your property tax). Here’s an overview of these factors.
The process starts when a local public official – the tax assessor – determines your home’s taxable value. In Minnesota, the taxable value of a home is a percentage of its “market value” – basically, what the home would sell for on the open market. The taxable value is 1% of the first $500,000 of your home’s market value, and 1.25% of any additional value. The percentage figure is also known as the assessment ratio.
The taxing authorities multiply the taxable value of your home by the tax rate to arrive at the tax you’ll owe. Let’s say the market value of your home is $500,000. This means the taxable value of your home is $5,000. And let’s assume that the tax rate is $500 for every $1,000 of taxable value. Your property tax for the year will be $2,500 (5 x $500 = $2,500).
Local officials set the tax rate, so the rate varies depending on where you live. You can’t do much about the tax rate except to vote wisely for the elected officials who determine the tax rate, and carefully consider revenue issues that appear on the ballot. But the story is different for the taxable-value factor. Here, you have more leverage. If the taxable value assigned to your home is too high, you may be able to get it reduced – and save a bundle in property tax. A $500 reduction in your annual tax bill would add up to $5,000 in savings over a ten-year period. Not bad!
Example: Larry and Joan own a home in Minnesota. The tax assessor, believing that the house has a $400,000 market value, has placed a taxable value of $4,000 on their home (1% x $400,000). The local tax rate is $500 for every $1,000 of taxable value. This means that their annual property tax is $2,000. Larry and Joan do some research and conclude that, based on recent sales of comparable homes, the taxable value of their home should be $3,000. They successfully appeal their assessment. Now, their tax bill is $1,500 a year instead of $2,000.
You can get contact information for your tax assessor from the Minnesota Property Tax Directory.
How to Check the Official Tax Record for Your Home
The tax record for your home may contain inaccurate or incomplete information that leads the tax assessor to place too high a value on it. You can get of a copy of the tax record at the tax assessor’s office. If you’re not sure where it’s located, call city hall and inquire, or look online at the Property Tax Directory mentioned above. Also, check to see if the assessment record is available online.
Review the tax record for errors. Among other things, check the following:
- Is your home correctly classified as residential property?
- Is the size of your home and the lot it sits on correctly stated?
- Does the record accurately list the number of bedrooms and bathrooms?
- Does the record list improvements that were not actually made?
- Are defects in your home – such as a leaky basement or an aging roof – mentioned?
- Is the age of your home accurately stated?
- Is the purchase price accurate?
- Does the record give you the benefit of all the tax breaks that you may qualify for – such as those that may apply based on your income, age, disability, or military service?
If there’s wrong or incomplete information, let the tax assessor know so that the record can be corrected and the taxable value adjusted. But even if the tax record is accurate, you may disagree with the tax assessor’s conclusion regarding the market value of your home. In that case, you’ll need to do more.
Gather Information About Whether Your Home Has Been Fairly Valued
Two types of information can help you establish that the tax assessor has placed too high a taxable value on your home. The first (and most important) is how the assessor has treated homes similar to yours. The second is how much homes like yours are currently selling for.
Taxable Values of Similar Homes
Review the assessment records for homes in your community that resemble your own. You’ll find those records at the tax assessor’s office. Finding comparable homes will take time and effort, but can be worth it if you believe that your home is truly over-valued. Try to find homes that have approximately the same square footage as yours and, preferably, are located in the same neighborhood or a nearby one. If similar homes have a taxable value lower than yours, this is strong evidence that you’re over-assessed.
Example: Todd and Liz own a three-bedroom ranch-style home in a subdivision with many homes like theirs. The taxable value of their home is $3,750. They believe this amount is too high. They check the records for a dozen similar homes in their subdivision and discover that the average taxable value of those homes is $3,400. What’s more, most have finished basements and Todd and Liz don’t have this amenity. Todd and Liz have good evidence for claiming that the taxable value of their home is too high.
Sale Prices of Similar Homes
If you bought your house recently, the price you paid is excellent evidence of its current value. Regardless of when you bought your home, you should gather information about recent sales prices of similar homes in your community. Finding these sales prices may take some doing. For advice on gathering this kind of evidence, see the Nolo article Listing Your House: What List Price Should You Set? Some online resources such as Zillow can be useful. Try to avoid transactions in which the buyer has purchased a home from a relative, or at a foreclosure or property tax sale. The sales prices in such transactions may be artificially low and won’t be convincing evidence of true market value.
You can also consider asking an experienced real estate broker to give you information about recent home sales in your area from the Multiple Listing Service database. You may need to pay a modest fee for such assistance. If the stakes are high, you can hire an appraiser to gather the information and provide a written report, though this will be more expensive. A local lender or real estate broker may be able to recommend a qualified appraiser. If not, check out the Appraisal Institute website (here you can search for a professional assessor by zip code).
Tip: If you recently re-financed your home or took out a home equity loan, the lender probably ordered a professional appraisal. Get a copy of it. It may give you powerful ammunition in your quest for a reduced taxable value.
After investigating the taxable value of your home, you may conclude that the number set by the assessor is too high. To find out what measures you can take to reduce the taxable value, see the companion article, Procedures for Challenging Your Property Tax Assessment in Minnesota.
To learn more about the property tax system in Minnesota, read Understanding Property Taxes posted by the Minnesota Department of Revenue.