The effective tax rate is used to compare property taxes. It allows comparison of tax burdens between properties of different values, types, and locations. Effective tax rate is a standard measure of comparison for property taxes nationwide. The effective tax rate shows tax as a percent of market value. The formula is:
Effective Tax Rate = Net Tax ÷ Estimated Market Value
Estimated market value (EMV) is the value determined by the assessor as the price the property would likely sell for on the open market, where the buyer and seller are not related and both are educated about the property. The assessor determines each property's estimated market value based on sales of comparable properties, cost of construction minus depreciation, income generated by the property, and other relevant available information.
Exclusions: Property tax exclusions exclude property value from taxation for various reasons. The amount of taxable market value is reduced by excluding a portion of a property's estimated market value. Minnesota's exclusions include:
Homestead Market Value Exclusion
Veterans with a Disability Homestead Exclusion
Job Opportunity Business Zone (JOBZ) Market Value Exclusion
Plat Law Exclusion
This Old House Exclusion
This Old Business Exclusion
Homestead Property Damaged by Mold Exclusion
Market Value Exclusion for Elderly Living Facilities
The data includes only the Homestead Market Value Exclusion, Veterans with a Disability Homestead Exclusion, Plat Law Exclusion, This Old House Exclusion, This Old Business Exclusion, and Homestead Property Damaged by Mold Exclusion.
Deferrals: Deferral programs recognize that market value of certain types of property may exceed the value that would be determined if the property were limited to its current use. For example, a piece of agricultural land may be highly valued for development as a residential neighborhood but would carry a much lower value if preserved as agricultural land. To provide protection from these development pressures, deferral programs allow the difference in value and the associated taxes to be deferred, generally with the taxes for a number of years being due once the property changes use or ownership. Minnesota's deferral programs include:
Green Acres Deferral
Rural Preserve Deferral
Open Space Deferral
Metropolitan Ag Preserve
Aggregate Resource Preservation Deferral
The data includes only the Green Acres, Rural Preserve, and Open Space deferrals.
An exemption is when property is not taxable. All real and personal property in the state is considered taxable except Indian lands and other property exempt by law. Tax exemptions are based on the accomplishment of public purposes and not favoring of particular persons or corporations at the expense of taxpayers.