If you own real estate in Minnesota, you will soon receive (if you haven’t already) an estimate, known as the “Truth-in-Taxation” or “Proposed Property Tax” notice, of your real estate tax liability payable in 2026. Prior to receipt of this notice, typically in March or April of each year, Minnesota property owners receive an estimate of your property’s value as of January 2025, as determined by your respective local assessor. While you may have been pleased or disappointed with this “first look” estimate, your November notice will tell you approximately how much you will owe in the coming year. It is important to note that the Truth-in-Taxation notice is only an estimate and is not your tax bill (which will be sent in March), but it does provide you with the opportunity to budget for the tax payment or consider contesting the proposed valuation.
How are property taxes determined in Minnesota?
In Minnesota, property taxes are paid in arrears, meaning that the 2025 taxes are due and payable in 2026, usually in two installments due in mid-May and mid-October. The tax bill you will receive in March 2026 will be a percentage of the January 2025 value. Real estate taxes are a function of the tax rates set by government entities and the valuation of each property. Particularly if you own real estate in the greater Twin Cities area, don’t be surprised if your effective tax rate (taxes/estimated market value) rises. If property values have fallen, as they have on office buildings in the Cities’ central business districts, a city needs to tighten its budget and/or increase its tax rates to continue funding its service priorities.
How is my property’s tax value determined?
Local government assessors are charged with estimating the fee simple market value of the properties to which they are assigned—namely, the probable selling price, as of a specific date, in cash or cash equivalent, of the fee simple title, after reasonable exposure in a competitive market, assuming the parties would each act prudently, knowledgeably, in their own self-interest and under no duress. While assessors have a pretty good overall feel for valuations of the various types of properties — apartments, offices, medical offices, industrial, retail, residential, etc.— located within their respective jurisdictions, they typically don’t know the unique aspects of a particular property very well (if at all). Instead, they take a macro view of the market, performing mass appraisals at least every five (5) years. That said, a specific property may vary in value from the average due to a variety of factors, rendering a property less competitive on the marketplace. Some common factors include:
- Deferred maintenance;
- New competition and/or neighboring development;
- Traffic, access or visibility issues; or
- Obsolescence.
How do I know if the assessed tax value is correct?
While any number of factors can affect value, you may not know your property is overvalued for tax purposes unless you (i) recently bought it, (ii) have a current appraisal, or (iii) otherwise know that the property is underperforming. If you suspect that your valuation is too high, now is a good time to engage an appraiser to evaluate your property, its financials, and comparable sales statistics to help you determine whether further inquiry or a tax appeal is justified. Many appraisers will perform an initial “look-see” verbal assessment at limited cost, which you can then use to help evaluate your options and next steps.
Although an appraiser’s input up front is not necessary to pursue an appeal, it is often a good idea, particularly if you are unfamiliar with the market. In the case of rental properties, an appraiser’s input early in the process can be particularly helpful, since owners of income-producing properties will need to provide financial statements to the assessor in the course of a tax appeal. If the financial statements support a higher value, the assessor can perhaps use that information to justify an increase the assessed value in future years. Furthermore, if the case goes to trial, the court has the discretion to raise taxes for the year appealed. Having an appraiser review financial statements in advance and advise on whether an appeal may be appropriate can help avoid that risk down the road.
How do I appeal my tax value?
While the government-established tax rates are unappealable, if you have good reason to believe that your property may be overvalued, misclassified, or taxed unequally, filing a property tax appeal may result in some relief. Filing a property tax petition with your local district court, allows you to negotiate with your County assessor. Most (not all) cases settle out of court. Property tax appeals for taxes payable next year must be filed on or before April 30, 2026. This deadline is hard, with extremely rare exceptions. It is generally too late to appeal for taxes payable in 2025 and prior years.
Our team has helped clients over the years with hundreds of property tax appeals and would be happy to answer any questions you have about the process.
