2012 Property tax law change

Homestead Property: Value Exclusion replaces Credit

Hennepin County has recently mailed 2012 Proposed Property Tax Statements.

A new law in 2011 has replaced the former homestead credit with what is termed a market value homestead exclusion. See details below.

Your proposed tax statement

You will note that your proposed tax statement (see a sample on Hennepin County's website external link ) references "2010 Taxable Market Value for 2011 Taxes" as well as "2011 Taxable Market Value for 2012 Taxes." The taxable value for 2012 taxes showing on your statement has been reduced by the new market value exclusion if your property has homestead classification and previously qualified for the homestead credit. This exclusion is for property tax calculation purposes only. Your total Estimated Market Value, which you received notice of in March 2011 and is the basis for your 2012 property taxes as adjusted by the new Market Value Exclusion to yield your Taxable Market Value, is not affected. Your Estimated Market Value for taxes payable in 2012 can be obtained from the Hennepin County website. external link

Final 2012 property tax statements will be mailed in March 2012. These statements will clearly identify total estimated market value, as well as any exclusions and the taxable market value on which property taxes are calculated.

Sample Bloomington 2012 Proposed Tax Statement with information (on page 2) on how to calculate the new Homestead Market Value Exclusion
Insert mailed by Hennepin County along with property tax statements which provides details about this important property tax change

For additional information

The League of Minnesota Cities has created and collected a variety of resources to help cities understand the new homestead market value exclusion (HMVE) program and how it differs from the discontinued market value homestead credit (MVHC) program.

Understanding the Transition to Homestead Market Value Exclusion

For your information, MPR put together a video explaining the Market Value Homestead Credit and the new Market Value Homestead Exclusion.

MPR video: Why are Minnesota property taxes going up?

About the Market Value Homestead Exclusion created in 2011

2011 legislation changed the Market Value Homestead Credit to Homestead Market Value Exclusion.

Under the former system, a homestead property received a property tax credit on their tax statement as a deduction from the amount due. The maximum amount of the credit was $304, and phased down to $0 when home value exceeded $413,700. The total amount of the credit for all homestead property in the City was to be reimbursed each year from the State. However, the State while crediting the homesteaded residential properties, due to State budget cuts did not reimburse a number of cities including Bloomington. This failure to reimburse Bloomington amounted to approximately $11 million for these credits over the past eight years. As such, there has been a shortfall of property taxes collected versus taxes levied.

The new 2011 legislation provides for a portion of each home's market value to be excluded for property tax calculations. The amount excluded is directly proportional to the amount of the credit under the old program. This exclusion shifts tax burden from homestead residential to commercial, industrial, apartments, non-homestead residential and any home valued greater than $414,000, in order to provide the tax relief to homeowners who had previously received a homestead credit. The resulting property tax for a homestead property in the new program will essentially be a "wash" with the old system.

For budgeting purposes, the uncertainty of MVHC reimbursement from the State has been eliminated. Now, what we levy is what we will receive (less delinquencies).

For more information contact:

Lori Economy-Scholler, Chief Financial Officer
1800 W. Old Shakopee Road, Bloomington, MN 55431-3027
PH: 952-563-8790; FAX: 952-563-8789
E-mail: finance@ci.bloomington.mn.us