Minnesota Property Tax Laws

Property taxes are determined by many different factors, including the market value of your home, the current use of that land, and more. 

Property taxes are an annoyance for property owners, but these taxes provide essential funding that supports local government services like school districts, hospitals, and public transportation. 

This article covers five Minnesota property tax law areas that you need to know before selling. Once you understand these laws, you will better understand property taxes and the amount you need to pay. 

We will discuss the following issues to clarify the taxation process: 

  • Understanding property tax in Minneapolis 
  • Property tax relief
  • Property tax programs
  • Who is responsible for setting taxes? 
  • What are your tax rights? 

Property tax is a confusing but necessary issue to deal with when selling property in Minnesota. Laws vary depending on the state and even county, so determining what you need to do before selling your property can make you feel like climbing the walls. 

Minnesota Property Tax Laws

Property Tax Laws In Minnesota To Know When Selling A House

The property tax has existed for centuries, and the amount of red tape to navigate has seemingly multiplied over the years. 

Minnesota law divides the label of “property” into three categories for taxation purposes: 

  • Residential 
  • Commercial
  • Agricultural

The value of specific types of property owned by an individual or legal entity determines property tax rates. The municipality’s local government calculates property taxes. 

Rules concerning the amount of tax levied and the types of property taxed will differ depending on the jurisdiction. When selling property in Minnesota, it is essential to review the area’s local laws in which the property exists. 

Hiring a real estate attorney is an option for dealing with complex property concerns. These laws are difficult to navigate if you do not have prior experience. Real estate property includes land, utilities, and equipment, making property tax law more complex than many other areas of tax law. 

Property taxes include state and local taxes. The two types of property taxes are market value levies and levies based on net tax capacity. 

The assessor takes the property’s estimated market value, subtracts any exclusions, and multiplies the market value by the tax capacity set for the property’s class. This value is the tax capacity. This is the first part of an equation that will be applied against a value to develop a total property tax bill.

A market value levy is a tax set by voters and applied to the estimated market value of your personal property. Property taxes require payment in two equal amounts due on May 15 and October 15.

Minneapolis Tax Laws

Minneapolis is in Hennepin County, which contains more than 20% of Minnesota’s population. The tax rates in this area are the highest in Minnesota and above the national average. 

Minneapolis levies are increasing by 5.5% in 2022. St. Paul’s levies are rising by 6.9%. The pandemic led to significant tax increases in Minneapolis as housing shortages worsened. Home values in the Near North neighborhood increased by 12.6% in 2021. 

Officials are increasingly directing property owners toward underutilized property tax refund programs, which contain several million dollars in unclaimed funds. 

Minnesota Property Tax Relief

Property owners can file for a property tax refund with a due date of August 15. Homeowners may file online with tax preparation software or with the proper forms. 

The Homestead Credit Refund requires a valid Social Security Number, ownership of homestead property, meaning the taxpayer owns and resides in the home, and property tax payments are not overdue. 

Two types of homestead credit are available. Regular credit uses your property taxes and income to determine eligibility, while special credit uses the amount your property taxes increased. 

Subtractions can reduce your tax bill and increase your refund amount. Any of these will qualify you for a subtraction: 

  • You list dependents on your tax return. 
  • You or your spouse were older than 65 no later than January 1, 2022. 
  • You paid into a retirement account.
  • You or your spouse had a qualifying disability no later than December 31, 2021.

Minnesota Property Tax Programs

Several programs exist to help individuals reduce property tax payments. Some programs require an application, and some are automatic. Here are some of the available programs:

  • Agricultural Homestead Market Value Credit: Lowers the taxes due on certain types of agricultural and rural land. 
  • Blind/Disabled Homestead Classification: It offers a reduced classification rate for blind or disabled individuals. 
  • Disaster Relief: Three different programs are available based on the type of damage to the property. 
  • Homestead Property Damaged by Mold: Tax reduction for property owners with over $20,000 in mold damage. 
  • Market Value Exclusion for a Veteran with a Disability: This program provides a one-time exclusion of up to $300,000 to grant lower property taxes for qualifying disabled veterans and their caregivers.
  • Homestead Classification: Reduced tax rates for properties that are the primary place of residence for the owners. 
  • Sustainable Forest Incentive Act (SFIA): Owners of forested land should utilize effective forest management practices. Corporations can also use this program. 

Who Is Responsible for Setting Taxes?

The state assessor determines how property is classified and valued. This determination is done annually on January 2. Notices go to all property owners. 

Examining sales of similar properties that occurred between October 1 and September 30 determines the value of your property when selling a house for cash. 

The County Auditor determines the tax amount for each property owner by estimating the fair market value of each property. The tax amount for this estimated valuation divides among all properties of the same class to arrive at the total assessed value.  

The Auditor determines tax values by analyzing the state general tax rate. Each property owner’s proposed net tax amount is assessed based on these tax values.

What Are Your Tax Rights

What Are Your Tax Rights?

Between April 1 and June 30 of the tax year, you have the right to appeal how your property is classified and valued. The value and classification steps finalize on July 1.

If you believe the assessed property valuation is incorrect or violates your taxpayer rights, you can appeal it in several ways. First, a one-step appeal involves verifying the accuracy of all information with the assessor and seeking an adjustment. This case goes to the regular division, and you can appeal the decision. 

You may also pursue a three-step appeal. After visiting the assessor, you appeal to a Board of Review. The board meets in April or May, and you can appeal in person or via mail. You can then appeal to the county Board of Equalization. 

This board meets in June, and you can appeal in person or via mail. You may appeal to the Minnesota Tax Court by April 30 of the year after the assessment. After this process, Small Claims Decision will hear the case. This decision is final. 

Conclusion

Minnesota’s property tax system is complex and confusing. This article has highlighted some significant points to consider when looking for companies that buy houses in Minnesota and sell your home.  

However, other features may affect how much you will owe in taxes or for what kinds of exemptions you qualify. 

If these concerns sound like they would derail a prospective sale, it is best to consult with an estate attorney who deals specifically with this field. We buy houses in Minneapolis if you’re ready to get started. 

This article does not provide legal advice but gives readers insight into some critical Minnesota property tax law updates that could help them make better-informed decisions about their real estate transactions.

kevins

Kevin is a real estate investor dedicated to helping homeowners sell their properties quickly and without the stress and hassle of a traditional listing.

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