Minnesota Special Homestead Classification:
Property Tax Relief for People
with Disabilities
by Patrick K. Oden
If you are a Minnesota homeowner
and have a disability, or a relative with a disability lives
with you, then you may be eligible for Special Homestead Classification
based on disability. If you qualify, your home will be taxed using
special rules that will ease your tax burden.
Property tax is unusual
since the amount you pay is not necessarily proportional to how
much you earn or consume, as income and sales taxes generally
are. You may have bought or inherited a home when it was worth
less money, but now the property's value has increased dramatically.
Perhaps you bought your home when you were earning a large salary,
and later you became disabled and had to give up your job. For
whatever reason, the property tax on your home may be unmanageable
in your current situation. Minnesota tax law provides some relief
to disabled residents against rising property taxes.
All property located
within Minnesota is subjected to taxation—unless specifically
exempted. Determining the amount of tax depends on two factors:
1) property classification, and 2) property assessment.
While property value
assessment is subjective—therefore difficult to dispute—classification
should be objective, based on the statutory guidelines.
Benefits of Disability Classification
Special classification
results in a reduction in the homeowner's tax bill. The 2006
tax code states that, for residential property of class 1a, “[t]he
first $500,000 of market value of class 1a property has a [tax]
rate of one percent of its market value.” An assessor determines
market value, or how much the owner could expect to sell the
property for at the time of assessment. Property value in excess
of $500,000 has that excess taxed at 1.25 percent.
But under the special classification,
class 1b, the first $32,000 of market value is taxed at only
0.45 percent. The remaining market value is taxed at normal rates.
Let's compare the property
taxes due in 2006 on a class 1a homestead valued by a county
assessor at $100,000 and the same property reclassified as class
1b. This comparison does not include other taxes that may apply,
such as local school district levies.
Class 1a property is taxed
at 1 percent of the $100,000 market value for a total of $1000.
The class 1b property is taxed at two separate rates: 0.45 percent
of the first $32,000 of market value and 1 percent of the remaining
$68,000 of market value. The total amount due totals $824.
The $176 tax bill reduction
amounts to a savings of 17.6 percent. As the value of the property
increases, the proportion of savings will decrease. A homestead
valued at $200,000 will see a savings of 8.8 percent.
Who Qualifies for Reclassification
To qualify for class 1b,
the owner or related resident must be permanently and
totally disabled . Individuals with partial or temporary
disability will not qualify. Proof of disability must be provided
in the form of a letter or other document from a qualified agency
that has already determined that you are permanently and totally
disabled. The Department of Revenue suggests using the copy
of the initial letter from the agency that approved your benefits.
Affidavits from yourself, family members, or physicians are
not accepted.
How to Apply for Reclassification
To have your property's
classification changed under the disability qualification, you
must apply using a Minnesota Revenue form designated PE12.
You may complete this form
yourself, or contact an attorney for help with preparation. Once
completed, mail the application to the Minnesota Department of
Revenue at the address provided on the form.
The Department of Revenue
notes that decisions may take four to six weeks. If your classification
is changed, your home will remain in the program for as long
as you own your home or the disabled relative lives with you.
However, if you move to a new home, then you will have to reapply
for a new special homestead classification.
The application deadline
for 2007 is October 1, 2006. If you do not file your application
by this deadline, your homestead classification may not be changed
for the next year.
Patrick K. Oden is a licensed
Minnesota attorney. You can reach Mr. Oden online at http://pkodenlaw.com/
or phone 651-210-9409. Click for site: Minnesota
Attorney: Predatory Lending Practices.
