Property Taxes 101

Property Tax 101

Most people know that the assessors' office will review their property every few years. Yet few individuals understand how the property tax process works.

Facts about property tax

The first step is for the assessor to determine the value of a property using the market value process approach-what similar properties have sold for. Assessors must follow tax classifications and rates that are established by the state legislature.

Property value, multiplied by the classification rate, produces the tax capacity of the property. The total of all properties equals the tax base or tax capacity. Once that is determined local governments can determine their budgets. Following that the Auditor's Office totals up the amount needed and the local tax rate is then established.

The auditor or treasurer's office mails out tax statements. Notice of valuation goes out each spring. The appeal process is listed on the back of that statement.

The appeals process:

  1. The assessor's office is the first stop in the appeal process.
  2. If the appeal is unsuccessful the next step in the appeal process are the local Boards of Review. These are held in April or early May in most cities, townships or for locations the county office.
  3. If that does not resolve the issue the taxpayer can go to the Board of Equalization in late June.
  4. A taxpayer's last recourse is the Minnesota Tax Court.

Property Tax Terminology

Net Tax Capacity

The county assessor determines each property's estimated market value. Due to limited market value provisions established in statute, the property's taxable market value could be lower.· The tax base is each property's net tax capacity, based on the property's taxable market value and the relevant class rate or rates (depending on property type) (taxable market value) * (class rate) = (net tax capacity)

Tax Rate

Each local tax jurisdiction certifies a levy equal to the amount of revenue it desires to raise through property tax. The levy and jurisdiction's tax base determine the jurisdiction's tax rate: (levy) / (total net tax capacity) = (tax rate)

Property Tax

The property tax on a parcel of property is computed using the rates of all the local taxing jurisdictions where the property is located: (net tax capacity) * (total tax rate) = (property tax)