Shouldn't My Property Taxes Be Going Down?

Property values across the U.S., including Minnesota (and Minnesota lakeshore) have been declining.  So, of course, one would expect their property taxes will decrease next year as well.  Sadly, a decrease in your property taxes is unlikely to happen.  In order to understand why, we have to take a look at how the property tax system in Minnesota works.

Unlike income and sales taxes, which are rate-based taxes, Minnesota's property tax does not work this way.  Rather, property tax is a levy based tax.  This means that taxing districts, such as cities, counties, school districts and special taxing districts, determine how much money they will need to raise in property taxes in order to balance their budget.  The “levy” amount is then used to determine the tax rate which is to be applied to local property.  Therefore, a change in the value of local taxable property will affect the distribution of what each property’s share is, but will not likely affect total revenues generated by the state. 

Given this levy-based system, there are three basic factors that will determine an individual parcel’s property tax liability: (1) your local levy, the rate your local taxing district(s) decide to impose on property, (2) your parcel’s share to total property tax base, this valuation includes estimated market values, the portion of the value which is taxable, and the class rate (statutorily set), and (3) applicable tax credits, credit amounts which are subtracted from the tax liability.

Finally, the property tax system in Minnesota has a time lag component- the assessment cycle.  It typically takes assessors six months or more to take into account new sales, in terms of valuing properties.  Additionally, even once they do account for the decrease or increase in value there is another lag of one year or more before those values are used to calculate your property taxes. 

This is a very simplified view of property taxes; don’t expect major changes in your tax bill to come quickly. However, that being said, it is worth while to talk to your local assessor about the valuation of your property, this could save you money in the future.