Determination of Property Taxes

Minnesota has one of the most complicated property tax programs in the nation and can be confusing to some people to fully understand what is happening behind the scenes in the development of an individual tax liability.  While the following explanation will simply touch on some key factors, if you would like to understand this topic in greater detail, the Minnesota Department of Revenue has a Tax Calculation Course which provides a more detailed explanation.

The first step is when an assessor visits the property.  They are observing key elements of the property in order to develop the most accurate estimation of the property as possible.  While they are at the property, they are also weighing out what the proper classification of the property is.  This can affect a tax liability more than the valuation of the property.  The classifications rates in Minnesota current have a range from .45% to 2%; identifying the property classification is essential in the assessment process.

The second step in the process is determining the tax capacity of each property and the tax capacity of the jurisdiction.  This is done by multiplying the taxable market value of each property by its corresponding classification rate.  The tax capacities of all properties in a jurisdiction are then added together to get the tax capacity of the jurisdiction.

The third step is to divide the jurisdiction’s levee by the tax capacity to develop a tax rate.  The governing body for each jurisdiction establishes their own levee based on what they need to operate.  Your property is often affected by several taxing authorities who each develop their own levee.

The fourth step is to multiply the tax capacity of the individual property by the tax rate to develop the specific tax liability for the property.

This scenario does not account for the various property tax programs which would apply either an exclusion amount or credits.