Property taxes, also referred to as an ad valorem tax, are taxes collected based on the value of your real estate, including your home. This type of tax is not collected by the federal government, but by the states, counties, cities, and other local governments. As such, property tax rates vary across states, and also within each state. And while the general process of assessing the value of your home by a local government official and calculating your property tax based on your area’s current property tax rate is similar across states, the process of collecting property taxes can also vary.
Rochester Property Tax Rate
In general, property tax rates in the state of Minnesota are close to the national average of 1.08%. The state’s average effective property tax rate is 1.15%. Particularly in Olmsted County, where Rochester is located, the average effective property tax rate is higher, at 1.20%.
How Taxes Are Calculated
The Records and Revenue Department computes your property taxes based on the assessed value of your property, multiplying this by the total tax rate of the district in which your property is located. The value and classification of your home are determined by the Olmsted County Assessor’s Office.
Assessors are required by the state to value property at 100% of market value. The estimated market value (EMV) for property tax purposes is defined as the likely price a property would sell for on the open market. Taxable market value is the value that your property taxes are actually based on, after all the reductions, limitations, and deferrals. Properties in the county must be assessed by January 2nd of each year.
The market value of each property in Olmsted County is determined by:
- Viewing the Property
- Gathering Data
- Computing the Value
- Analyzing Sales
- Value of New Improvements
Factors That Affect Property Taxes
There are several factors that may affect the market value of your property. One such factor is when the market value of other properties in your taxing district change, resulting to the shifting of taxes from one property to another. Another factor could be when the State General Property Tax changes. When the city, township, county, school district, or special district’s budget and levy change, property tax rates may also be affected. Special assessments may also be added to your property tax bill.
Property tax rates may also be affected when federal and state mandates are changed, as well as changes on the aid and revenue from the state and federal governments. Voters may also affect property taxes when a school, city/township, county, or special district referendum is approved by them. When the state legislature changes the portion of the tax base paid by different types of properties, this will also affect property taxes. Other state law changes may also adjust the tax base.
Assessed Value vs Home Sale Price
You may be wondering why the assessed value of your property is different from its sale price. First, you need to consider the gap between the time when your home was assessed and the date when the sale took place. Keep in mind that an appraisal is an estimate of property value based on historical data at a set point in time, which is January 2nd of each year, and the market can change dramatically by the time your home is sold.
Another factor to consider are home improvements. Minnesota law requires real estate properties to be inspected only once every five years, except when there is new construction or demolition. Between inspections, your house may have either undergone improvements or have deteriorated from neglect. These changes may not be determined by assessors during their annual evaluations, since they only see the exterior of your home.
Minnesota Property Tax Refund Programs
There are two refund programs available to homestead property owners and renters in Minnesota. The first one is the Regular Property Tax Refund which is also called the “circuit breaker”. This refund is based on your household income and the amount of property tax you pay. If you are a homeowner with a total household income less than $115,020, you may qualify for a refund up to $2,820. If you are a renter and your total household income is less than $62,340, you may qualify for a refund up to $2,190.
The second refund program is the Special Property Tax Refund. This program is available to MN homeowners. There is no income limit and the maximum amount that may be refunded is $1,000. To qualify, you must have resided in your home on January 2, 2019 and January 2, 2020; your net property tax on your homestead increased by more than 12% from 2019 to 2020; the increase in your property tax was at least $100; and the increase was not due to improvements that were made to your property.
Senior Citizens Property Tax Deferral Program
The Senior Citizens Property Tax Deferral Program is available to senior homeowners who are 65 years or older, and whose total household income is $60,000 or less. Under this program, a senior taxpayer may defer a portion of their homestead property taxes until some later time. Initially, the senior will be required to pay 3% of the total preceding year’s household income, and the state pays the amount over 3% (the “deferred tax”) to the county in which the home is located. The deferred tax is a loan and the interest on the loan is calculated at the same rate as unpaid state taxes. A lien is attached to the property. The homeowner must pay the deferred tax plus interest before the title of the property can be transferred back to them.
To qualify for this program, the following criteria must be met:
- The property must be owned and occupied as a homestead by a person at least 65 years old. If married, one spouse must be at least 65 years old and the other must be at least 62 years old.
- Total household income must be $60,000 or less for the calendar year preceding the year of the initial application.
- The home must have been owned and occupied as the homestead of at least one of the homeowners for at least 15 years before the initial application.
- There must be no state or federal tax liens or judgment liens on the property.
- The total unpaid balances of debts secured by mortgages and other liens on the property must not exceed 75% of the assessor’s estimated market value for the current year. This includes deferred tax and interest amounts under the program, unpaid and delinquent special assessments and property taxes, penalties and interest (but excluding the current year’s property taxes and Property Assessed Clean Energy liens).
To apply, the applicant must provide a report detailing any mortgages, liens, judgments, or unpaid property taxes on the property. For “Abstract” properties, these reports must be prepared by a licensed abstracter. For “Torrens” properties, the information is part of the “Condition of Register” available from the county recorder. If owners are not sure which type of property they have, they may inquire with the county recorder.
To learn more about property taxes in Rochester, Minnesota, you may visit Olmsted County’s official website.