How Property Taxes are Calculated

Your property tax bill includes local and state property taxes. Local property taxes fund local programs and services, such as public schools, fire and police protection, streets, libraries and more. State property taxes fund school districts, towns, cities, counties, and other special taxing districts.

Yearly property taxes depend on these factors:

  • Tax levy (county, city/township, and school)
  • Value (estimated market value) and classification of the property
  • Tax credits or programs that may reduce the tax due
  • Additional school taxes (referendums) or state property taxes that apply to certain properties

GLOSSARY OF TERMS:

Base tax

At the most basic level, there are two types of bases upon which property taxes are levied in Minnesota: net tax capacity and referendum market value.

Class rate

The percentage rate is assigned to a particular classification of property. For example, the class rate in 2026 for residential homestead properties is 1.00% for the first $500,000 in value and 1.25% for anything over $500,000 in value. Click here to see the classification rates for taxes payable in 2026.

Classification

The classification of your property refers to how the property is used. Different classifications include residential (homestead or non-homestead), agricultural (homestead or non-homestead), seasonal recreational residential, commercial, industrial, rural vacant, or exempt. Each classification has its own class rate.

Local tax levy

The local tax levy is the budget calculated by counties, cities, townships, and schools. The levy is the total annual dollar amount needed to fund programs and services for the entire community.

Local tax rates

Local levy totals divided by the total estimated market value of all taxable properties within the city/township.

Net tax capacity

Taxable Market Value × Class Rate = Net Tax Capacity

Referendum market value

For residential properties the referendum market value equals the estimated market value multiplied by the referendum rate (determined by the referendum levy).

For agricultural properties the referendum market value equals the value of the HGA (house, garage, and 1 acre) multiplied by the referendum rate (determined by the referendum levy).

Tax credits or programs that may reduce tax due

Here are some examples of programs that reduce taxes due: property tax refund program, market value exclusion for disable veterans, senior citizen property tax deferral, green acres program, rural preserve program, etc.

Taxable market value

This is the value your property taxes are actually based on. It is the estimated market value minus any exemptions or special programs.

Value

The value is the estimated market value of your property which is what the assessor estimates your property would likely sell for on the open market.

County tax levy is set by the Houston County Board of Commissioners.
Local tax levies are set by the city/township board members.
School tax levies are set by each school district (Houston, Spring Grove, Caledonia, or La Crescent).
The county assessor sets the value and classification for each property.
The value and classification are used to determine your share of the levy.
The county auditor calculates the tax due for each property in the county.
  1. Taxable Market Value × Class Rate = Net Tax Capacity
  2. Net Tax Capacity × Local Tax Rates = Base Tax
  3. Base Tax − Credits + Referendum Levy and State General Tax = Property Tax Due