By Jared Swanson, jared.swanson@house.mn
Property Tax 101:
Property Tax Variation
by Property Type
July 2022
Causes of property tax variation between property types
The primary cause of variation in property tax burdens is Minnesota’s classified property tax
system. In a classified system, each class of property is assigned one or more class rates. The
property’s taxable market value is multiplied by the class rate(s) to determine the property’s
tax base, known as its net tax capacity.
Besides the class rates, variations in tax by type of property also occur because the state
general tax and school district operating referendum levies apply to some types of property but
not to others. School district operating referendum levies are levied on a separate tax base
known as referendum market value, which is not classified and excludes certain agricultural and
seasonal recreational property. The state general tax only applies to
commercial/industrial/public utility property and seasonal recreational property.
Class Rates Schedule for Taxes Payable in 2023
Class Property Type (major property types only)
Class
Rate
Subject
to State
Tax?
Subject to
School
Operating
Referendum
Levies?
1 Homestead
1a Residential homestead
Up to $500,000 1.00% No Yes
Over $500,000 1.25 No Yes
2 Agricultural
2a Agricultural homestead
House, garage, & 1 acre: up to $500,000 1.00 No Yes
House, garage, & 1 acre: over $500,000 1.25 No Yes
Agricultural land & buildings
Up to $1,890,000 0.50 No No
Over $1,890,000 1.00 No No
2b Agricultural nonhomestead 1.00 No No
2c Nonhomestead rural vacant land 1.00 No No
Property Tax 101: Property Tax Variation by Property Type
Minnesota House Research Department Page 2
Class Property Type (major property types only)
Class
Rate
Subject
to State
Tax?
Subject to
School
Operating
Referendum
Levies?
3 Commercial/Industrial/Public Utility
3a Commercial/Industrial/Public Utility
Up to $150,000 1.50 Yes* Yes
Over $150,000 2.00 Yes* Yes
Electric generation attached machinery 2.00 No Yes
4 Other residential
4a Apartments (4 or more units) 1.25 No Yes
4bb Residential nonhomestead single unit:
Up to $500,000 1.00 No Yes
Over $500,000 1.25 No Yes
4b Residential nonhomestead 2-3 unit and undeveloped
land
1.25 No Yes
4c Seasonal recreational residential (noncommercial):
Up to $500,000 1.00 Yes** No
Over $500,000 1.25 Yes** No
4d Low-income apartments:
Up to $100,000 per unit 0.75 No Yes
Over $100,000 per unit 0.25 No Yes
* Subject to state general tax at commercial-industrial rate.
** Subject to state general tax at seasonal recreational rate.
Other factors that cause variation
Variations also occur because of various property tax exclusions and credits. Homesteads
benefit from the homestead market value exclusion, which provides for up to $30,400 of a
homestead’s market value to be deducted before determining the taxes payable. Other
exclusions are the disabled veterans’ exclusion and the agricultural “Green Acres” program.
Certain types of property also qualify for property tax credits that reduce the net tax on the
property. The biggest property tax credit programs are the agricultural market value credit, the
taconite homestead credit, the disparity reduction credit, and the school building bond
agricultural credit.
Local variation also occurs because tax rates are determined separately for each taxing
jurisdiction in the state, based on each jurisdiction’s levy and tax base.
Property Tax 101: Property Tax Variation by Property Type
Minnesota House Research Department Page 3
Effective tax rate
Effective tax rate is a measure of tax burden useful in making property tax comparisons. It is
defined as net tax divided by market value (i.e., tax as a percent of market value). It allows
comparison of tax burdens between properties of different values, different types, and
different locations.
Comparison of Property Taxes on Various Types of Property,
Within the Same Taxing Jurisdiction, Each with an Estimated Market Value of
$200,000
(Property taxes payable in 2023)
Property Type
Class
Rate(s)
Net Tax
Capacity
Property Tax*
Effective
Tax Rate
Gross Net
Agricultural homestead** 0.5/1.0% $1,040 $1,168 $717 0.36%
Agricultural nonhomestead 1.0 2,000 2,100 2,100 1.05
Residential homestead 1.0 1,808 2,278 2,278 1.14
Seasonal recreational residential (i.e.,
cabin)
1.0 2,000 2,400 2,400 1.20
Residential nonhomestead (1 unit) 1.0 2,000 2,480 2,480 1.24
Residential nonhomestead (2-3 units) 1.25 2,500 3,005 3,005 1.50
Apartment 1.25 2,500 3,005 3,005 1.50
Low-income apartment 0.75/0.25 1,050 1,430 1,430 0.72
Commercial/Industrial 1.5/2.0 3,250 4,193 4,193 2.10
Commercial/Industrial @
$2,000,000***
1.5/2.0 39,250 59,813 59,813 2.99
* These examples assume a total local net tax capacity tax rate of 105 percent, a total market value tax rate of
0.19 percent, a state commercial-industrial tax rate of 40 percent, and a state seasonal recreational tax rate of
15 percent.
** The agricultural homestead is assumed to consist of a house valued at $40,000 and agricultural land and
buildings valued at $160,000.
*** This property has a market value of $2,000,000 to show a typical effective tax rate on a larger
commercial/industrial property.
Minnesota House Research Department provides nonpartisan legislative, legal, and
information services to the Minnesota House of Representatives. This document
can be made available in alternative formats.
www.house.mn/hrd | 651-296-6753 | 155 State Office Building | St. Paul, MN 55155
