In 2011, Minnesota’s Legislature decided to repeal the Homestead Market Value Credit and replaced it with a program known as the Homestead Market Value Exclusion.  Beginning in 2012 the homestead credit will be eliminated.  Under this new law, property taxes will increase for some homeowners.  There will be no state paid credit, but rather the entire property tax levy will be paid by local taxpayers.

Minnesota is no longer providing a homestead credit and instead the entire levy is being paid by local property taxpayers.  According to the State of Minnesota, this change will save the state $261 million in monies that will not be sent to local governments.  Additionally, a study done by the State of Minnesota shows that homeowners and business owners will see increases averaging 4.7 percent.

The impact of this new law is that property tax increases will vary depending on the community and the type of property.  Because the exclusion is a reduction in the value subject to tax, tax rates and the taxes of all properties will be affected. Homestead values will be reduced which will shift a larger share of the tax burden other property types and homes with higher values.

This new law will create changes in property taxes and tax amounts will depend on factors other than just the homestead value.  Most home will pay higher property taxes.  Additionally, local governments may choose to increase taxes as well since Minnesota will be sending less money to local municipalities.  Homeowners should check with their local tax offices to determine whether there will be additional property taxes levied.

In addition to homeowners, commercial and industrial property owners will see taxes increase as well, even if the values of their properties have declined.  These properties are considered non-homestead and will pay a higher property tax bill.

40 percent of the value on the first $76,000.00 of a property’s value is excluded from tax under the new law.  If a home is valued at more than $413,800.00 will not get a homestead exclusion.  Property owners will not see any impact, up to a homeowner whose home is valued at $76,000.00 or less.

In response to the change at the State of Minnesota level, some local governments have chosen to raise property taxes as well.  St. Louis County for example is raising property taxes at the local level 1.8 percent.

Homeowners and business owners should be aware of the changes to the law and be prepared to pay more for their property taxes beginning in 2012. Any questions can be directed to Klun Law Firm – A Minnesota Real Estate Law Firm

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