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<br />words, if two properties had equal <br />market values but different class rates, <br />the property with the higher class rate <br />would have a higher tax capacity. The <br />property tax statement may show th.e <br />abbreviated classification name, such as <br />Res. Hmstd. (residential homestead). <br /> <br />The Mechanics of Taxes <br />The market value and classification is <br />used to determine the property tax bill. <br />Most property taxes are levied against <br />the parcel's tax capacity and some are <br />levied against the taxable market value. <br /> <br />. The tax capacity of a parcel is <br />determined by multiplying the <br />parcel's market value by its <br />classification rate. For example, a <br />home with an assessed market value <br />of $250,000 has a class rate of 1.0 <br />percent, which equals a tax capacity <br />of $2,500. <br /> <br />Property taxes that are levied against tax <br />capacity are calculated using tax <br />capacity rates. These rates are <br />determined by dividing the tax capacity <br />levy by tlle total tax capacity of a <br />jurisdiction. The sum of all tax capacity <br />rates, the total local tax rate, is <br />multiplied by a parcel's tax capacity to <br />determine the tax capacity portion of the <br />tax bill. <br /> <br />Voter-approved referenda levies are <br />applied to a parcel's taxable market <br />value instead of the tax capacity. The <br />market value rate is found by dividing <br />the market value levy by the total market <br />value. Multiplying the market value rate <br />by the parcel's taxable market value <br />results in the market value portion of <br />property taxes. The tax capacity portion <br />plus the market value portion less any <br /> <br />credits comprise the total tax bill for a <br />property . <br /> <br />Taxes payable for the current year and <br />previous year are listed at the top of the <br />tax detail section on the statement. These <br />amounts do not include any special <br />assessments and are used to determine <br />eligibility for refund programs. <br /> <br />State Aid Reductions <br />The statement must contain a section <br />that details how an individual's taxes <br />have been reduced by state aid and credit <br />programs. The tax amount without any <br />aid or credits applied is shown first, with <br />deductions for aid and credits itemized <br />separately. <br /> <br />All state aid amounts that cities may <br />receive are certified by July. Aid helps <br />close the gap between a city's <br />expenditure needs and its ability to raise <br />revenues through property taxes, fees, <br />charges and other sources of revenue. <br />See the "Local Government Aid 101" <br />document for more information on LGA, <br />the largest state aid program. <br /> <br />An individual property tax bill may be <br />reduced by applicable credits, such as <br />the homestead market value credit <br />(MVHC). This credit provides a <br />reduction in property taxes of 0.4 <br />percent of the homestead's market value <br />up to a maximum of $304 dollars <br />Homesteads valued at $413,778 and over <br />do not receive credit. Local jurisdictions <br />are reimbursed by the state for the total <br />amount of credits given to homeowners. <br />Agricultural homestead properties may <br />benefit from the Agricultural Market <br />Value Credit program which works <br />similarly to MVHC. See the "Market <br />Value Homestead 101" document for <br />further details on these credits. <br /> <br />2 <br />