Understanding how property taxes work is crucial for all investors, property managers, and landlords.
Whether you own a small house or a duplex, you've decided to invest in property and want to ensure you know everything you can about it.
This comprehensive guide will help you understand the property tax system in Minnesota. You'll learn about the essential rates, calculations, dates, and more. Likewise, we discuss what to do if you're accidentally late on payments.
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Understanding Different Types of Property Tax Bills in Minnesota
There are two state general property tax rates for county auditors, and the Minnesota Department of Revenue has certified them. This determines the uniform and statewide rates from the Property Record Information System in Minnesota (PRISM).
Here they are:
- The state general levy commercial-industrial rate for taxes payable is 33.003 percent for 2023.
- The state general levy residential recreational property tax rate is 12.321 percent for 2023.
Overall, the commercial-industrial levy in 2023 that's used to determine the rate sits at $716,990,000. The seasonal residential state tax levy is $41,690,000.
How Many Times Do You Pay Property Tax a Year in Minnesota?
In Minnesota, you pay property taxes in two equal installments per calendar year.
Usually the first installment is due May 15, while the second is due October 15. This might differ depending on the type of property you own, though.
For example, if your property is agricultural, then the second payment is due on November 15 instead.
Consequences of Late Payments
If you don't pay property taxes by the due date, you will accrue penalties (interest). You'll find the penalty rates on the back of your tax statement, which increase monthly and can change from year to year.
You may also pay delinquency fees or have the property seized for nonpayment.
How to Pay a Property Tax Bill in Minnesota
Once you get your property tax statement, you can pay online through your financial institution or in person at the Government Center in Hennepin County.
If you overpay, you could be entitled to property tax refunds.
How Much Is Property Tax in Minnesota?
Property tax payments are paid based on property values and other property tax data. You'll have to know the class rates, which include:
- Disabled homestead - 0.45 percent
- Residential homestead - 1.0-1.25 percent
- Residential non-homestead - 1.0 to 1.25 percent
- Apartments with four units - 1.25 percent
How Is Property Tax Calculated in Minnesota?
Most people who pay homestead property taxes in Minnesota have to use a property tax calculator to make it easier on them. It's an interactive tool that helps users compare data by city, year, population, and region.
If you don't wish to use a property tax calculator, you'll use this property tax formula: you will multiply the class rate by the taxable market value to get the tax capacity. Then, you'll multiply that by the local tax rate to get the base tax. Subtract any credits and add the state and levy taxes to get the property taxes due.
Most people use a property tax calculator for their personal property because it's easier. You can find the property tax data you require from the LMC.
How Can I Lower My Homestead Property Taxes in Minnesota?
There are some options for property tax relief:
- Property Tax Refunds - These are only available to renters and homeowners living in their homes.
- Senior Citizen Program - Seniors with household incomes of less than $96,000 might qualify for the property tax deferral program.
Natural Gas Pipeline Abatement
If your personal property is part of the distribution pipeline or intrastate natural gas transportation system, you could get an abatement of your state general levy for 12 years.
You'll have to meet these requirements:
- Construction of your system started after January 1, 2018.
- The system offers service to areas where over half the households lacked natural gas access on January 1, 2018.
- The system offers service to areas not found within the Washington, Scott, Ramsey, Hennepin, Dakota, Carver, and Anoka counties.
Owning property in Minnesota can be attractive as an investor. You've researched the market value and property values and know you could make money.
However, you still need to focus on the tax system, and this guide has helped you learn about everything.
If you're looking for more tips on property management accounting, check out our whitepaper on the best tips for simplifying this complex process.