Understanding property taxes

There are many factors that affect your property taxes.

Factors that affect property taxes

  • The market value of a property may change.
  • The market value of other properties in your taxing district may change, shifting taxes from one property to another.
  • The State General Property Tax may change.
  • The city budget and levy may change.
  • The township budget and levy may change.
  • The county budget and levy may change.
  • The school district's budget and levy may change.
  • A special district's budget and levy may change.
  • Special assessments may be added to your property tax bill.
  • Voters may have approved a school, city/township, county, or special district referendum.
  • Federal and state mandates may have changed.
  • Aid and revenue from the state and federal governments may have changed.
  • The state legislature may have changed the portion of the tax base paid by different types of properties.
  • Other state law changes may adjust the tax base.

How taxes are calculated

The Records & Revenue team calculates property taxes by applying the district's total tax rate to the assessed value of each property. Property values and classifications are established by the Assessing Services team.

To learn more about how property taxes are calculated, please read the steps below or contact our office for assistance.

Step 1: Determine the Levy (Property Tax Revenue Needed)

  • What it means: Each local jurisdiction (city, county, school district) creates budget for the year. They subtract all non-property tax revenue sources (like state aid, fees, grants) from this budget.
  • Formula:

Levy = Total Proposed Local Budget - Non-Property Tax Revenue

  • Purpose: This gives the amount that must be raised through taxes to fund local services like school, roads and public safety.

Step 2: Calculate Tax Capacity for Each Property

  • What it means: Tax capacity is a measure is a measure of a property's taxable value adjusted by its classification rate (set by state law). Different property types (residential, commercial, agricultural) have different class rates>
  • Formula:

Tax Capacity = Taxable Market Value x Class Rate

  • Purpose:  This ensures that properties are taxed fairly based on their type and value.

Step 3: Compute Local Tax Rate

  • What it means: The local tax rate is determined by dividing the total levy by the total tax capacity of all taxable properties in the jurisdiction.
  • Formula: 

Local Tax Rate = Levy / Total Tax Capacity

  • Purpose: This creates a uniform rate applied to all properties based on their tax capacity.

Step 4: Calculate Base Tax for Each Property

  • What it means: Multiply the property's tax capacity by the local tax rate.
  • Formula:

Base Tax = Tax Capacity x Local Tax Rate

  • Purpose: This gives the starting point for the property's tax bill before credits and additional levies.

Step 5: Apply Adjustments

  • What it means: The base tax is adjusted for:
    • Homestead Credits: Reductions for qualifying homeowners.
    • Referendum Amounts: Extra taxes approved by voters (e.g., school funding.)
    • State General Tax: Applies to certain property types like commercial or seasonal recreational.
  • Formula:

Total Property Tax Payable = Base Tax - Homestead Credits + Referendum Amounts + State General Tax

  • Purpose: This final step ensures all credits and special levies are accounted for.

Tax rates


State General Tax Levy

What is the State General Levy Tax?
The state general levy tax is a property tax applied only to certain properties. Revenue from the tax is deposited in the state general fund. The state property tax levy was enacted in 2001.

What is the tax used for?
The money raised from the state general tax does not go directly to local governments (counties, cities, school districts, etc.). Instead, money raised by the tax is deposited in the state general fund for the state’s budget use.

Is my property affected by the state general tax?

There are three types of property that must pay the state general tax, at different rates, and based on different values:

  1.  Commercial/industrial properties: Class 3 commercial, industrial, and public utility property (exclusive of electric generating machinery) and class 5(1) unmined iron ore property.
  2.  Seasonal residential recreational properties: Class 4c(1) resorts and 1c “Ma and Pa” resorts, and class 4c(12) non-commercial seasonal properties pay some state general tax.
  3.  Certain non-profit community service organizations: Class 4c(3)(ii) property owned by a non-profit community service-oriented organization.

How much is the tax?

  • The state general levy for commercial/industrial property is $784,590,000 for taxes payable in 2018 and thereafter.
  • The state general levy for seasonal residential recreational property is $44,190,000 for taxes payable in 2018 and thereafter.
  • The state property tax is included in your property tax statement and is paid to the county treasurer along with your local property taxes. Separate payments are not required. The county treasurer forwards the state tax to the Department of Revenue

What is the tax rate?
The tax rate is calculated annually and announced by the commissioner of revenue by January 1 of each year. For more information on the tax rate for the current year, you can visit the Minnesota Department of Revenue State General Property Tax website.

How is the rate determined?

  • A preliminary state general levy rate is certified by the Commissioner of Revenue by October 1 each year. County Auditors use the preliminary rate in preparing Truth in Taxation notices for taxes payable the following year.
  • The final state general levy rate is certified by the Commissioner of Revenue by January 1 each year. The final state general levy rate is used to calculate final tax amounts on property statements.

How has the rate changed over time?
For the first year in 2002, the state general levy amount was $592 million. Under current law, the levy is $828,780.00.

How much will I pay on my property?
If you have a cabin valued at $100,000.00, only 40 percent of the first $76,000 of market value would be subject to the new tax and the remaining $24,000 would be taxed at its full value. For commercial/industrial property, the first $100,000 of market value is excluded when applying the tax rate.

Truth in Taxation (TNT)

Property taxpayers in Olmsted County receive their "Notice of Proposed Taxes" in mid-November each year. This notice is also referred to as Truth in Taxation or TNT. The notice estimates the property tax for the following year if the taxing jurisdictions approve the budget amount they are considering. Property owners are invited to attend meetings held by the local units of government to express their opinions on local budgets and taxes. The meeting dates and locations are identified on the notice.

It is important to remember, however, that the proposed taxes on the notice do not reflect any special assessments on the property or any school or city referendums passed in the November general election. If any of the questions affecting their tax levy pass, the final taxes may be higher than expected or any special assessments on the property
 

Credit for military service in a combat zone

The credit for Military Service in a Combat Zone is available to members of the military who have recently served in a designated combat zone or hazardous duty area. There is a credit of $120 for each month served.

For more information about military tax credits available, required documentation, forms, and instructions, visit the Minnesota Department of Revenue, Credit for Military Service in a Combat Zone page.

Property tax refunds

Two refund programs are available to homestead property owners. Both are through the State of Minnesota:

  1. Regular Refund: Sometimes called the "circuit breaker," is based on your household income and the amount of property tax you pay.
  2. Special Refund: To qualify, your net property tax must increase by at least 12 percent and $100. The special refund is not based on income. For more information or to determine if you are eligible for either of these refunds, read and fill out Form M1PR.

Forms and instructions for the Property Tax Refund are available through the Minnesota Department of Revenue.

Senior Citizens Property Tax Deferral

Forms and instructions for the property tax deferral for senior citizens are available located below.

Ways to apply:

Mail your completed application and a copy of this year’s property tax statement, and property report (see instructions) to:

Minnesota Department of Revenue
Mail Station 3340
600 N. Robert St.
St. Paul, MN 55146-3340

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