Understanding Property Tax

What are property taxes used for?

Local property taxes help fund local programs and community services, such as public schools, public health, fire and police protection, roads, parks, libraries, and more. State property taxes fund school districts, towns, cities, counties, and other special taxing districts.

What factors are involved in property tax calculation?

Yearly property taxes are calculated based on the following factors:

Local tax levy – the budgets created by the county, cities, townships, schools, and “special taxing districts” such as watershed districts, housing and redevelopment authorities, and regional development commissions
 
Estimated market value – the property value determined by the assessor’s office
 
Classification – the property classification is based on how the property is used and is determined by the assessor’s office
 
Classification rate – the class rates are set by statute and vary by property type
 
Property tax credits – the credits applied to a tax statement for certain programs (e.g. homestead market value exclusion, agricultural market value credit, etc.)
 
Referendum levies – additional levies approved by voters
 
State general tax – additional state levy applied to commercial-industrial and seasonal residential recreational properties
 

Steps to Calculate Property Taxes

Step 1: The county, cities, townships, and school districts calculate how much property tax revenue is needed, known as the Local Tax Levy:

Total Proposed Local Budget - Non-property Tax Revenue = Local Tax Levy
 
Step 2: The levy is spread among all taxable properties according to their Tax Capacity:

Estimated Market Value - Exclusions & Deferrals = Taxable Market Value

Taxable Market Value × Classification Rate = Net Tax Capacity
 
Step 3: The levy and total net tax capacity (for all properties) are used to calculate the Local Tax Rate:

Local Tax Levy ÷ Total Net Tax Capacity = Local Tax Rate
 

Step 4: For each property, the county auditor determines if any tax credits or additional taxes should be applied, such as:
Property Tax Credits
Referendum Levies
State General Tax

Estimated Market Value × Tax Rate = Referendum Market Value Tax (except Class 1b blind/disabled, disabled Veterans, etc.)

Property Tax Formula

  1. Estimated Market Value - Exclusions & Deferrals = Taxable Market Value
  2. Taxable Market Value × Class Rate = Net Tax Capacity
  3. Net Tax Capacity × Local Tax Rates = Base Tax
  4. Base Tax - Credits + Referendum Levy and State General Tax (when applicable) = Property Tax Due
  • 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.