Tax refunds could grow for Minnesota’s homeowners, renters

First, the bad news: The state can’t reduce your property taxes. Not directly, anyway. Those levies are handled at the local level.

But there are things it can do to lighten your overall tax burden. And one of them is the homestead credit refund.

If you were a full- or part-time resident of Minnesota during a given tax year, you can claim a credit on your taxes that could mean a refund of up to $3,140, provided your household income was less than $128,280. What’s more, if your property taxes did go up more than 12% over the previous year, there’s a special credit for that, too, provided you didn’t make any major home improvements.

That said, your refund could grow if Rep. Dave Lislegard (DFL-Aurora) has his way. He’s sponsoring HF1506 that would expand the homeowner credit refund for current recipients by:

• increasing the maximum refund allowable for all income ranges by $300;
• reducing co-pay percentages by 5 to 10 percentage points, depending on the income range; and  
• reducing the income thresholds used to calculate eligibility for the credit by 0.1 percentage points, for claimants with incomes between $23,040 and $35,650.

On Wednesday, the House Property Tax Division laid the bill over, as amended, for possible inclusion in its division report to the House Taxes Committee. It did the same with a bill that would do something similar for renters.

HF1323, sponsored by Rep. Esther Agbaje (DFL-Mpls), would expand the range of incomes eligible for the Minnesota renter’s credit. As amended, it would also make corresponding reductions in the co-pays and maximum refunds as part of the credit phaseout.

The renter’s credit is currently available to those with household incomes of up to $73,680, but that maximum income would grow to $90,000. The bill would also reduce co-pays by 5% for claimants with incomes above $50,510 and increase the maximum credit for claimants with incomes above $63,150.

Speaking in favor of the proposal, Rep. Aisha Gomez (DFL-Mpls) said, “Property taxes are second only to sales taxes among the major tax types in their regressivity. The property tax refunds are a way to introduce income sensitivity on the back end. This is a way to make them more equitable.”

The Department of Revenue estimates the expanded homestead credit refund would decrease the General Fund by $97.9 million in fiscal year 2025, and that 582,000 homeowners would see an increased refund.

As for the renter’s credit changes, the department estimates that they would reduce the General Fund by $24.5 million in fiscal year 2025, with 101,000 renters receiving a larger refund.