We are getting close to having a decent understanding of how our property taxes work in Montana. So far in wonky words we explained – mills, centrally assessed property taxes, homestead exemption, market value, and protested taxes. Today we will discuss property tax rate.
As we all know, determining what the property taxes will be on a piece of property is complicated and requires a series of steps. The Montana Department of Revenue is responsible for appraising - or valuing - property in the state to determine the market value. Each taxing jurisdiction – county, city, or school district –uses these values to calculate property taxes.
The Montana Legislature created 14 different classes of property, such as residential and commercial property, agricultural land, business equipment, and centrally assessed companies. Each property within a class is valued in the same manner.
The Montana Legislature assigns a tax rate to each class of property. This represents the percentage of the market value that will be taxed. For example, the tax rate on residential, commercial and ag property is 2.47%. Business equipment has a tax rate of 1.5% for the first $6 million in property, exempting the first $100,000 from taxation, and then 3% for property in excess of $6 million. The tax rate on centrally assessed property ranges from 3% to 12%, depending on the type of property.
That tax rate is multiplied by the property’s taxable market value to determine the taxable value. With those values, local taxing jurisdictions – cities and counties – apply the mill levies to the property’s taxable value to determine taxes owed. County governments are responsible for collecting property taxes and distributing the appropriate portion of those taxes to the state, cities, school districts and other taxing jurisdictions.
Do you think you’ve got it? Still want more? The Montana Budget and Policy Center released a paper on property taxes as a whole. We think you will enjoy it!
Here’s one more thing to add. Property taxes are critical to funding our local needs like schools, police, fire, and so much more. Did you know that 82% go directly to local governments and schools? The remaining portion goes to the state to help ensure equitable funding of our schools and colleges and universities. Check out the graph below.
MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.