Homestead Credit Elimination: You Should Own More than One Home
Laurie Blake’s article in the StarTribune about the elimination of the Homestead Credit explains that the changes to the tax code are nothing if not complex:
The change arises from the elimination of a tax break called the homestead credit, which saved homeowners as much as $304 a year and next year would have required the state to pay $261 million to local governments to make it up.
In its place is a new “homestead market value exclusion” that, at no cost to the state, shrinks the portion of the market value that can be taxed on homes valued under $413,800.
Here’s how I understand it:
– The Homestead credit gives homeowners a small property tax break on their PRIMARY home.
– It has been available to homeowners with properties valued at $413,000 or less, with the largest credit going to those with home values of less than $76,000. The closer your home is valued to $413,000, the less of a credit you receive, with no credit going to those with primary homes valued above $413,000.
Now, I’m no CPA, but as I understand things, it sounds like the way to go here is to own more than one home. This particular shift in property taxes by the MN GOP only effects people who own a single home. The key here is to diversify. If you own a portfolio of properties, you’ll only take this tax hit on your primary residence.
This was a crafty move by the MN GOP. They figured out how to increase taxes on middle class home owners while protecting people with more than one home (and those with homes valued at over $413,000).
Now, Andy Post over at Minnesota Democrats Exposed, has pointed out that it was Governor Dayton who signed this change into law. This nugget from the Pioneer Press reminds us of who raised taxes on the middle class:
Republican lawmakers proposed eliminating the credit to cut state spending and help erase a projected $5 billion budget deficit.
Dayton originally opposed the change and vetoed the first version that reached his desk but later accepted it as part of a final budget agreement to end a 20-day state government shutdown.
In the end, Republican lawmakers proposed raising property taxes on middle class homeowners in order to avoid raising income taxes just a little bit on Minnesota’s highest income earners. And, after holding their ground to the point of shutting down our state government for weeks, they got what they wanted: a budget balanced on the backs of the middle class.
