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COUNTY CONNECTIONS: Will Recent Real Estate Transactions Affect My Property Taxes? (Part 1 of 3)

Jul 23, 2021 11:16AM ● By Editor

By Bob Thompson, Cook County Assessor from Cook County MN - July 23, 2021

 

 Robert Thompson, Cook County Assessor:  Photo: Cook County

Cook County real estate has seen sharp increases in demand in 2020 & 2021, which is reflected in the asking prices of recent listings. Several examples exist where a property that sold just two or three years ago, with a lengthy marketing time, has been recently re-marketed at 20%-30% (or more) over the last sale price and in many cases these properties are receiving multiple offers almost as soon as they hit the market.

As the Cook County Assessor, I am asked many questions regarding the real estate market and property taxes. In this three-part article, I hope to answer some of the most common taxpayer questions, I will highlight special property tax programs that may provide financial relief and I will give my thoughts on this HOT real estate market.

There is a common misconception that increasing property values mean local governments collect more in tax revenue, this is not the case. The amount of tax dollars levied has a direct correlation to operational expenses of the levying authorities (County, City/Twp., School, Hospital) and any related increases over the previous budget. Think of the total budget as ‘the price of the pie’, then each property’s assessed value & classification could be thought of as it’s ‘slice of the pie’.

Fearing an increase in property taxes, many property owners have cautioned me that recent trends in the real estate market could result in a ‘bubble’ and that these recent trends are not sustainable. Be that as it may, the assessment calendar is one that reacts to changes in the market. If demand for Cook County real estate declines in the future, assessed values will follow suit.

Think of it this way, in October, if you find yourself looking at your 2nd half property statement and the assessed value, you’ll probably think ‘I could get a lot more for my home than that today’. I agree, many taxpayers could. The market value indicated on your 2021 tax statement is based on the 1/2/2020 value, which is based on sales that occurred from October 2018 through September 2019.

Given the sales-study period that assessor’s use to equalize property values, sales occurring in the market today will affect values in 2022, for taxes in 2023. 

Given the sales trends, most Cook County property values will be increasing for the 2022 assessment. So how will that affect future property tax bills?

In Minnesota, the property tax system has a tiered system of classifications, creating some ‘progressive property tax’ characteristics. In this context, a progressive property tax essentially means that higher-valued homes and cabins may pay a higher effective tax rate than lower-valued homes and cabins. The homestead market value exclusion has a similar effect, lower-valued homesteads receive a larger market value exclusion, resulting in a lower effective tax rate.

With that said, increasing property values can have different effects on taxes, based on the value and classification of the property. With the system designed as it is, after 2022 market values are adjusted, lower valued homesteads will still pay a lower effective tax rate than a higher valued homestead.

Several options may exist for Cook County residents who see increases to their tax bill, the Minnesota property tax refund programs, and the senior citizen property tax deferral, to name a few. These programs are for owner-occupied properties with a homestead classification, and individuals that pay rent. One refund is based off income, the other ‘special refund’ is based off the amount of tax increase over the previous year. Talk to your tax professional or visit the Minnesota Department of Revenue’s website for more information on the M1PR form. This form is due August 15thbut you may be able to file up-to one year after the due date.

Please be sure to catch next week’s article where I will discuss additional assessor topics in depth, including news related to assessment, Assessor’s sales-study processes, the equalization process, sales chasing, and more.

County Connections is a column on timely topics and service information from your Cook County government. Cook County – Supporting Community Through Quality Public Service

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