Tax Foundation listed Minnesota as being the eighth-most burdensome state in the country, at a rate of 10.8%. Individual income tax rates were averaging 9.85%, according to the foundation's most recent data. Even though Minnesota residents may feel the crunch at tax time, there may be some relief for homeowners. Property taxes in Minnesota were the 20th highest in the state, and are slightly below the national average. These taxes help fund a number of different programs, which is why it is considered one of the best places to live when it comes to education and healthcare.

Average Property Tax Rate in Minnesota

Minnesota’s average effective property tax rate of 1.17% is the 20th highest in the United States. There are two types of property taxes in Minnesota. First, a levy is applied to the property’s taxable market value based on the home’s class. Residential property is assessed at 1% on the first $500,000 and 1.25% on everything else above $500,000. This levy is calculated after any exemptions from the market value. One of those is the homestead exclusion. Anyone who claims a principal residence in the state for an owner-occupied home qualifies for an exemption of up to $30,400. This applies only to homes valued at $413,800 and below; any home above that do not qualify for the exclusion. 

The second kind of tax is a market value levy. This is typically voter-approved and varies from county to county. All property taxes are collected on a county level.

Counties With Highest and Lowest Property Taxes

Roughly 20% of the state's population is in Minneapolis, which is located in Hennepin County — one of the highest taxed counties in the state at 1.33%. Ramsey County is also taxed the same rate, according to the most recent data from SmartAsset. However, the median annual payment in Ramsey County averaged $2,658 as of 2018, compared to Hennepin, where the tax payment was $3,139. The median home value for each was reported at $199,200 and $235,800 respectively. Aitkin County reported the lowest rate of taxation at 0.52%. The median home value there was $165,300, with an average annual tax payment of $866. 

Minnesota Compared to Neighboring States and the Nation

Minnesota has a lower average effective property tax rate than its neighbors. The closest rate is found in North Dakota, where the average is 1.22%. South Dakota assesses a comparable tax rate, as its average property tax rate is 1.36%. Iowa's property tax assessment is even higher, with an average rate of 1.47%. However, all these states trail Michigan and Wisconsin, where the average property tax levies are 1.83 and 1.97%, respectively. Michigan has the nintth-highest property tax rate in the country, while Wisconsin has the fifth-highest rate.

Minnesota’s median annual property tax payment of $2,234 is the 20th-highest levy in the nation, on a median home value of $191,500. The national average tax is slightly above Minnesota's, at 1.21%. The average annual tax payment on a home valued at $250,000 would be $3,028. In Minnesota, the same value would net an average tax payment of $2,975.

Economic/Regulatory Explanations

Minnesota alleviates some property tax burden by assessing an income tax and a sales tax. Minnesota’s income tax brackets range from a levy of 5.35% to 9.85%. Meanwhile, the state sales tax is a fixed rate of 6.875%. In addition, Minnesota assesses a vehicle property tax rate of 1.3%. These taxes, in addition to property taxes, are used to fund numerous state and local programs and operations. However, taxes collected in Minnesota are heavily concentrated to fund public education and health care, where Minnesota boasts some of the best results in the country.

The reason Minnesota assesses relatively high property taxes is to fund schools and healthcare. According to Minnesota's revenue department, 34.2% of the state's property taxes fund early childhood, while 24.5% go to the state's healthcare program. Evidence to support the higher property taxes is seen in the results; pupils in Minnesota averaged the third-highest test scores in mathematics and the fifth-highest on the SATs. In addition, Minnesota is ranked as having one of the top healthcare systems in the U.S. WalletHub ranked Minnesota as having the fourth-best health care system as of August 2018. 

The Bottom Line

Minnesota's property tax rate is slightly below the national average, and ranks 20th highest in the country. Home values are still fairly affordable, and a homestead exemption may help keep the tax bill down. Funding for social programs like healthcare and education are made possible through property tax revenue, making Minnesota one of the top states in which to live. 

Missouri Property Tax Guide

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