Minnesota property tax law is governed by state statute, interpreted by the courts, and administered by the county. The Property Tax Division of the Minnesota Department of Revenue oversees each county. The Individual Income Tax Division of the Minnesota Department of Revenue is responsible for processing property tax refunds.
Minnesota property tax law involves the following legal areas and concepts.
Estimated market value
The assessor determines each property’s estimated market value based on sales of comparable properties, cost of construction minus depreciation, income generated by the property (if applicable), and other relevant available information.
Market value exclusions, taxable market value
For some properties, a portion of the market value is excluded from taxation. All homesteads with an estimated market value below $413,800 have a portion of the market value excluded under the homestead market value exclusion. Other market value exclusions are provided through the “Green Acres” program and the disabled veteran’s exclusion. A property’s taxable market value is its estimated market value less any applicable market value exclusions.
Net tax capacity, class rate
A property’s net tax capacity is determined by multiplying the property’s taxable market value by the relevant class rate or rates. Class rates are set by statute, vary by property type, and are uniform statewide.
Local taxing jurisdiction
A local taxing jurisdiction is any local unit of government that has the authority to levy property taxes. Examples are counties, school districts, cities, towns, and “special taxing districts” such as watershed districts, housing and redevelopment authorities, and regional development commissions.
Taxable net tax capacity
A taxing jurisdiction’s taxable net tax capacity is the total net tax capacity of all properties within the jurisdiction, excluding property located in a tax increment financing district.
Levy, levy limit
Each local taxing jurisdiction certifies a levy equal to the amount it intends to raise from property taxes in the upcoming year. For some local taxing jurisdictions, the levy may be constrained by state-imposed levy limits.
Local tax rate, total local tax rate
The local tax rate of a taxing jurisdiction is determined by dividing the jurisdiction’s levy by the jurisdiction’s taxable net tax capacity. The total local tax rate for an individual property is the sum of the local tax rates of all taxing jurisdictions in which the property is located.
Market value levy and tax rate
Most voter-approved levies apply to the property’s market value rather than its net tax capacity. The market value tax rate is determined by dividing the jurisdiction’s market value levy by the total market value of all properties within the jurisdiction (excluding properties classified as agricultural or seasonal-recreational, since those property types are exempt from market value levies).
Gross tax, property tax credits, net tax
Property tax credits reduce the gross tax that would otherwise be due upon a property. The most common property tax credits are the agricultural market value credit, the taconite homestead credit, and the disparity reduction credit. The remaining amount after subtraction of property tax credits is the net tax.