How Do Property Taxes Work?
Property tax refers to any tax you paid on an individual or corporate-owned property. Basically, this type of tax is applied to personal property (like cars, boats, etc.) and real property (land and buildings).
In recent times, some States are gradually moving away from taxing personal property. The focus is now primarily on real estate properties. The value of a real estate property tax is derived by multiplying the tax rate by the value of land and buildings. Most times, property tax rates are expressed in mills. Mathematically, a mill is one-tenth of a percent. But if you don’t understand how property taxes work, you may find it very complicated. However, below is a step by step process to calculate property taxes.
Determine the Property’s Value
Ideally, the first thing you should do before imposing tax on any property is to determine its market value. The market value of a real estate property is the current amount it would sell for.
Calculate the Property Assessed Value
The assessed value of a property is calculated by multiplying its market value by an assessment ratio. Assessment ratios are usually in a percentage ranging from 0 to 100 depending on the State imposing the tax. Some States may decide to use a fraction of the property’s market value. While others use the actual market value making their assessment ratios to be 100 percent.
Apply the Property Tax Rate
The property tax rate is also known as millage rate. It refers to the sum of all the rates applied by different tax jurisdictions. For instance, a particular real estate property could be subject to a municipal tax, county tax, and a school district tax. These different calculations will give you the property rate before credit. Depending on the State, taxpayers could get property tax credits to reduce their tax bill. You will need to subtract the credits before arriving at the property tax bill. Contact us now for help with your property taxes in Minneapolis.