There are some recent changes to the way the State calculates their tax rates for your property taxes. We are currently under the Market Value Homestead Credit (MVHC) formula, but will now be under what they are calling the Homestead Market Value Exclusion.
Basically your property taxes are going up. The State will longer be covering levies, so the jurisdictions are picking that portion up. I am still trying get a better understanding of this formula, so I am holding my opinion off until I understand the entire legislation better. Even though I don’t like the result right now, in the overall picture it might be a better system. I have thought for years they should scrap the whole “homestead” value all together, because a House is a House and should be taxed as a House (whether it is rented or owner-occupied, or a vacation house.)
But in the mean time we can go into what it will mean to the Homestead property owner. The following information comes from the House legislators website. (read full document here)
How It Works
The exclusion provides for a portion of each home’s market value to be excluded from its value for property tax calculations. The amount of value excluded is directly proportional to the MVHC the home received under the old law. In this way, each home contributes a smaller amount to each taxing jurisdiction’s tax base. The tax rate tends to be a little higher because of the reduced tax base, which is why taxes increase for the other types of property. The tax burden on any given homestead could be lesser or greater depending upon the mix of properties in the jurisdiction (more nonhomestead properties increases the likelihood that homestead taxes will be reduced and vice versa) and the level of the tax rate (higher tax rates make it more likely that homestead taxes will be reduced and vice versa).
Rather than pasting the entire document, I will jump to the visuals of what this means to the Homestead owner. Below is how the Calculations used to work, and how they will work. If you are anything like me you will re-read this 14 times and still be scratching your head.
- Minnesota property taxes heading higher (craigkamman.wordpress.com)
- Case Shiller Home Value Index MN vs. MN Property Tax revenue (craigkamman.wordpress.com)