What is the Difference Between Homestead and Non-Homestead Taxes?

If you have been looking at the Minneapolis MLS printouts I have been sending you, you may have noticed there might be a significant difference in the tax bills between two properties that are very similar. Now it could be a case of an assessor making arbitrary or capricious decisions. Those of us who have tried to understand how valuations are conducted realize that tax assessors must practice some sort of “dark art.” It is all very mysterious, and values along a street oscillate more than they used to.

Another Likely Suspect…

Another, very likely culprit causing the tax variation that you see, is the homestead status of the properties. The homestead credit has become smaller, but it still can amount to up to a difference of $300.00 per year in property taxes.

What is a homestead tax credit? Many first time home buyers are not familiar with homestead issues. Frequently, the first time they hear the term “homestead” is when the closer says “Make sure you apply for homestead. Do it right away, before you forget!”

Very simply, a homestead tax credit is applied to a property that is occupied as a primary place of residence.

How Does a Property Qualify for Homestead Credit?

You must satisfy ALL three of the following requirements to qualify for homestead:

1. You must be one of the owners of the property, or be a relative of at least one of the owners.

• Qualifying relatives include:
• Owner’s son or daughter
• Son-in-law or daughter-in-law
• Stepchild, stepparent
• Parent-in-law
• Grandchild, grandparent or grandparent-in-law
• Brother or sister, brother-in-law or sister-in-law
• Aunt or uncle, niece or nephew

Application for Homestead

Head down to the city hall and do the following:

1. Complete and sign an application. An occupying relative would need to sign the application.
2. Provide Social Security numbers for ALL owners. If it is not occupied by the owner(s), the Social Security number of the occupying relative is needed.
3. Provide a copy of the warranty deed or contract-for-deed
4. Submit a copy of Certificate of Real Estate Value

When to Apply

To qualify for full year homestead, homeowners must occupy the home before Jan 2nd, and file before January 15th.

Property that does not qualify on January 2nd, but is purchased and owner occupied on or before December 1st may qualify for a mid-year homestead credit, if the application is made before December 15th.

Do You Need to Apply Every Year?

No. Once homestead status is given, it remains with the property as long as it is owned and occupied by the same party.

What About Additional Properties?

If another property that you own is occupied by a qualifying relative as the primary residence, the property may be eligible.

How Much is the Homestead Credit?

The maximum homestead credit in the state of Minnesota is $304, for a property valued under $76,000. The amount of credit ascribed to the property goes down as the price goes up, until it reaches a value of $413,00, when the homestead credit goes to zero.

Possibly related posts:

1. Hennepin County Taxes
2. Important Questions for Your Minnesota Town Home HOA.