Reminder: Three State Tax Relief Programs for Homeowners and Renters

Upcoming budget hearings can be a good opportunity for cities to remind residents to file for either program.
(Published Nov 25, 2013)

During the upcoming Tax Hearing and Notification Process hearings (also called Truth-in-Taxation or TNT hearings), city officials can remind their residents that they may be eligible for three direct property tax relief programs: the homestead credit refund, the renter's refund, and the special property tax refund, also known as the “targeting program.”

Homestead credit refund
The homestead credit refund is a program that provides a refund to homeowners when their property taxes exceed a certain percentage of the household’s income. The 2013 Legislature renamed the former property tax refund program and also approved modifications to the eligibility guidelines and the refund structure that will increase the number of taxpayers eligible to receive the refund.

In addition, the Legislature added a new state notification to potentially eligible taxpayers. Combined, the changes enacted by the 2013 Legislature are expected to increase the program cost by $108 million for the upcoming biennium.

The 2013 eligibility changes, which are effective for refunds based on taxes payable in 2014, lowered the maximum property tax threshold percentage for determining eligibility from 3.5 percent of income to 2 percent of income for homeowners with household incomes from $19,530 to $65,049, and to 2.5 percent for those at higher income levels. For refund claims filed in 2014 (which will be based on property taxes payable in 2014 and 2013 household income), the maximum refund will be $2,580. Homeowners whose income exceeds $105,499 are not eligible for a refund.

The taxpayer notification provision for the homestead credit refund program was included in the 2013 omnibus tax bill due to legislator concerns that many eligible taxpayers were not aware of the program. Under the notification requirement, the Minnesota Department of Revenue (DOR) is directed to identify and notify taxpayers who may be eligible for a refund of at least $1,000. However, under the 2013 program changes, there may be many additional taxpayers who will be eligible for smaller refunds, and these taxpayers may not receive any notification of eligibility from the state.

Refund claims are filed using the DOR Schedule M1PR, which is filed separately from the individual income tax form. According to the Department of Revenue, claims filed before Aug. 15, 2014, will be paid beginning in late September 2014. However, claims filed electronically may be paid as much as a month earlier. The deadline for filing claims based on taxes payable in 2014 is Aug. 15, 2015.

Special property tax refund
The special property tax refund program, frequently referred to as the “targeting program,” directs property tax relief to homeowners who have large property tax increases from one year to the next. The special property tax refund has no income component, and a homeowner qualifies if the property tax on the home has increased by more than 12 percent over the previous year’s tax and if the increase is over $100. The maximum refund is $1,000.

In determining eligibility, the previous year’s tax amount is the net amount paid by the homeowner after deduction of any targeting refund received in that year. The homeowner must have owned and lived in the same home for both years. If any improvements were made to the home, that portion of the tax increase resulting from the improvements must be subtracted when determining the refund.

Refund claims for the special property tax refund are filed using DOR Schedule M1PR, the homestead credit refund form. There is a separate schedule on the back of the M1PR (Schedule 1—Special Refund) for the targeting program. The taxpayer files for this refund after receiving his or her property tax statement in February or March. Claims filed before Aug. 15, 2014, will be paid beginning in late September 2014. The deadline for filing claims based on taxes payable in 2014 is Aug. 15, 2015. Forms are available on the DOR website under “Forms and Instructions.”

Renter's refund
Renters may be eligible for a separate program referred to as the renter property tax refund or the “renter’s credit.” The renter’s property tax refund program is a state-paid refund that provides tax relief to renters whose rent and “implicit property taxes” are high relative to their incomes. Under the program, “rent constituting property taxes” is assumed to equal 17 percent of rent paid. If rent constituting property tax exceeds a threshold percentage of income, the renter is eligible for a refund equal to a percentage of the tax over the threshold, up to a maximum amount.

To qualify for refund claims filed in 2014, based on rent paid in 2013 and 2013 household income:

  • The renter’s household income for 2013 must be less than $57,169. The maximum refund is $2,000.
  • The renter must have lived in a building that was subject to property taxes or “payments in lieu of property taxes.”

Similar to homeowners, renters can file electronically as well. Renters can expect to receive their refund by mid-August if it is filed by June 15, or within 60 days of filing, whichever is later. Renters can receive their refund faster if they file electronically by May 15, choose direct deposit, filed form M1PR last year, and /or have a Certificate of Rent Paid form from their landlord.

For more information, contact the DOR’s Property Tax Refund Division at (651) 296-3781 or (800) 652-9094.

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