The 2011 legislature repealed the old homestead credit law and has replaced it with a new Homestead Exclusion law beginning with property taxes payable in 2012. It is confusing at best, even for those of us in the real estate field. Let's start with the difference between "credit" and "exclusion;" a credit is a reduction in the amount of taxes due while exclusion is a reduction in the amount of value subject to tax. Under the old credit based system, the homesteaded property received a credit (remember that's a reduction on the amount of property taxes) equal to .4% of market value for the first $76,000 in market value and went up to a maximum credit of $304, phasing out to $0 for homes valued higher than $413,800. With the exclusion system, homesteaded properties will receive a Homestead Market Value Exclusion equal to 40% for the first $76,000 in value and 9% above the value of $76,000, up to about $414,000. Homesteads with values higher than $413,800 will receive no homestead exclusion.
The biggest question seems to be "will my property taxes go up?" The answer is almost certain to be yes for most homeowners. Why, you ask? The state is no longer reducing total taxes and paying the credit to the local governments; the entire local property tax levy will be paid by the taxpayer. Most local governments will be required to increase their tax rates to cover the loss of money that previously came from the state. For many, the new exclusion will not be enough to offset the increases in tax rates.
For more details, please visit the Minnesota Department of Revenue and the Minnesota House Research Department.
Gina Dumas, Realtor ~ RE/MAX Results ~ www.GinaDumas.com ~ 712.718.2783
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