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Know how the homestead credit works
The homestead credit is a reduction in the property tax on a homestead BEFORE the tax is billed to the taxpayer. The credit is funded by the state. The homestead credit is not to be confused with the property tax refund of income tax paid to the state for which homesteaders may qualify.
Only homestead properties are initially eligible for the credit, but not all homesteads will get a credit for the reason described below.
As of the January 2, 2008 assessment for taxes payable in 2009, the homestead credit is on a sliding scale related to the taxable market value (TMV) of the property.
Starting at $100 of TMV, the credit increases to a maximum of $304 as the TMV increases to and then attains $76,000. For each dollar of TMV above $76,000, the credit is reduced by .09% until the credit is zeroed out at a homestead TMV of $413,800.
The homestead credit is one example of the way Minnesota’s property tax system intentionally causes dissimilar tax bills for similarly valued properties. An owner-occupied homestead assessed at $100,000 will pay less property tax than a rental home right next door that is also assessed at $100,000.