2012 Changes in Homestead Benefits:
2011 Law Change:
A New Homestead Market Value Exclusion replaces the Homestead Market
The 2011 Legislation repealed the Homestead Market Value Credit, (the
homestead credit), and replaced it with a new Homestead Market Value
Exclusion. The last year of the credit is for property taxes paid
in 2011 and the exclusion begins for property taxes payable in 2012.
*Click here for
information on how the
new law compares to the old law (PDF)*
Why the State Change:
- The elimination of the market value homestead credit was
included in the 2011 budget bills passed in the legislative special
session in July of 2011. By eliminating the credit, the state was
able to save roughly $260 million each year. This was one cost
saving measure the state used to close the $5 billion two-year state
- Under the old credit law, the state was reducing the taxes paid
by homesteaded property and instead the state was promising to pay
that portion of the tax to the local taxing districts (i.e., your
city, county, school, and other local taxing districts). However, in
seven of the last eight years, the state did not pay the full credit
amount to at least some local governments, due to its budget
problems. This meant each year many local governments were left with
a deficit in their budgets because of the state’s inability to pay
the amount it owed.
What is the Impact:
The impact of this state change will vary for
each property depending on a variety of factors. However, in general,
the elimination of the homestead credit and replacement with a homestead
exclusion is going to mean higher property taxes for most property
owners, even if property tax levies adopted by local governments do not
increase. The bullets below explain the most significant impacts of this
- The state is no longer providing a homestead credit and instead
the entire levy is being paid by local property taxpayers.
- The new homestead exclusion lowers the tax base, which has led
to increases in the property tax rates of most local taxing
jurisdictions. A property tax rate is calculated by dividing the
property tax levy by the total tax base.
- For properties that are non-homestead, including commercial and
industrial property, the higher property tax rates are likely to
mean higher property tax bills even if their values have declined.
- For properties that are homestead, the new homestead exclusion
may not be enough to offset the increases in tax rates and the
elimination of the homestead credit, thus many homestead properties
as well will experience tax increases.
Click here for more information from the Minnesota State Tax site.
Click here to find the Current Year Property Tax Refund, Form M1PR.
Information contained in this flyer was gathered
from bulletins and documents prepared by the
Minnesota House Research Department and Minnesota Department of Revenue.