[Mpls] Estimated Market Value & Taxable Market Value?

[Carol Becker]

Ken Bradley wrote:



>I have noticed a big difference between the estimated market value and the 
>taxable >market value.  The taxable value as a percent of estimated market 
>value seems to be all >over the place. I compared three homes and the value 
>ranged from 68% to 86%. If you >are paying 86% another property owner is 
>only paying 68% that seems to create an >unfair burden on one owner versus 
>the other. How does the city estimate that value?



Ken had originally asked a question about why properties valued the same 
paid different amounts of taxes.   I had listed a number of features in the 
property tax system that would result in this.   A more accurate answer to 
his question would be that there are programs out there take the estimated 
market value and transform it to the taxable value differently for different 
properties.



Confused?  Remember Carol's handy dandy property tax formula:



Value (adjusted) x percentage = taxes paid (adjusted)



Most of the adjustments that occur in the tax system actually occur on the 
value side, rather than the tax side, something that most people don't 
understand.  Few programs actually adjust taxes paid (the renter credit and 
the property tax refund does, for example but that is about it).  Most 
instead adjust the value side of the equation.



How do they do that?  The math that takes you from estimated market value to 
taxable value is complex.  Some of the things that can result in different 
taxable values for properties with the same estimated market values are:



  a.. the tax classification system (i.e. a property owned by a business 
will pay more in property taxes than a property owned by a homeowner or a 
house with a disabled person has a lower rate),
  b.. limited market value (the  State puts a limit on how fast your taxes 
can go up by limiting how fast your taxable value can increase),
  c.. programs like "This Old House" (where you can improve an old house and 
not have a portion of the increased value added to your taxable value)
Although, individual results may vary, my guess is that most of the 
variation you are seeing is mostly due to the limited market value.  Limted 
market value limits the growth in a person's taxes by limiting the amount of 
value added to the taxable pot for properties which have seen extraordinary 
value growth.  If you look at when each house was purchased and how much it 
has appreciated, I would suspect you would see a strong correlation to how 
much the taxable value varied from the estimated market value.



If you wanted, you could contact the Assessor and ask for a breakdown of 
each property that you have questions about to see how the estimated market 
value is transformed to taxable value for each property.



Carol Becker

Longfellow

Future Member, Board of Estimate and Taxation

Geek