Determination & Changes of Property Taxes

How is Property Tax Determined and What Causes it to Change Each Year?

There are three primary factors that determine your property tax:

  1. The tax levies of the districts you live in
  2. The value of your property relative to the value of all property in the taxing district
  3. How you use your property

In addition, there are a number of state laws that affect both the amount of your property tax and the way it is determined.

What is the tax levy?

Each year local governments go through a budget process to determine what services they will provide, how much these will cost, and where they will get their money.

After taking into account other sources of revenue (such as state paid aid, fees, etc.) the rest is levied on taxable properties. The tax rate for each taxing district is determined by the county auditor by dividing this levy by the taxable value of the property in the district.

Public meetings are held each year to give taxpayers a place to voice their concerns to elected officials.

How does my value affect my property tax?

Your share of the levy is based on the value of your property relative to the value of all other property in the district. For example, if a local government decided not to change the amount of its levy from one year to the next, your tax may go down, go up or remain the same. If the value of your property doesn't change, but the value of the other properties in your district go down, your tax will increase because your share of the total value increased. Likewise, if the value of the other properties in your district goes up, your tax will decrease because your share of the total value decreased.

Why does it matter how I use my property?

In Minnesota, properties with the same market value will be taxed different amounts depending on how they are used. For instance, commercial property will have a higher tax than residential property of the same value. This is done by using classification rates set by the state legislature to give more weight to the value of commercial property as compared to residential property.