If you just opened your truth-in-taxation notice and are stunned to see how little your house is apparently worth, take a deep breath. No, your house hasn’t really collapsed in value the way a lot of tax notices seem to indicate.
What may have plunged is your “taxable market value,” which is not the same as what your house might fetch on the market.
Last year, your “taxable market value” was, for most homeowners, the same as what the assessor actually thought your house was worth, that is, your estimated market value. Local tax officials used it to determine how much property tax you owed and then they subtracted a homestead credit if your house was worth less than $413,800.
This year, your “taxable market value” is still what your tax is based on, but it can be quite a bit lower than the true market value. This year, houses worth $413,800 or less have some of that value “excluded” before your tax is determined. So a house with a market value of $100,000 has a “taxable market value” of $71,760.
Ken Rowe in the Hennepin County Taxpayer Services Department, where they’ve been fielding complaint calls, likens it to the difference between adjusted gross income and taxable income on your federal income tax return.
But just because your taxable market value decreased, don’t leap to the conclusion that your tax is going down, too. Remember, the credit they used to subtract from your tax is gone this year. Taxes are all over the map. Our sample of 28 Minnesota cities shows that the tax on a median value home is rising in 22 of them.
This is clearer in some counties than others. Ramsey County, for example, shows the arithmetic on individual truth-in-taxation notices, by including your estimated market value and then subtracting the exclusion to yield your taxable market value.
For a full look at how communities are coping in these austere times, check out our Forced to Choose coverage.
And here’s my conversation about this with Tom Crann on All Things Considered: