After you finishing signing all the papers at closing to purchase a home in Minnesota you will likely be given instructions for homesteading your new home.
Is homesteading yet another thing you have to pay for?
No, homesteading doesn’t cost anything but it can provide valuable benefits if you own and live in your home as your primary residence.
After you purchase your home, you simply must submit your homestead application by December 31 to update your classification for the following year. There is no filing charge, and you only have to do it once. It remains in effect as long as you own and maintain the property as your primary residence.
You should receive the necessary paperwork at closing… application, copy of deed and CRV (Certificate of Real Estate Value)… as well as information on where and how to file (varies from jurisdiction to jurisdiction). If your property is occupied by a qualifying relative such as a son or daughter or parent, it may also qualify for homestead even if you don’t live there yourself… in this case you would also need to submit a Non-Occupant Co-Owner/Relative form.
You may only have one homestead per married couple in the state of Minnesota. Homesteads are administered by counties.
What are the benefits of homestead status?
- It may reduce the Taxable Market Value of the property, thereby reducing your taxes
- Under the current law beginning with the assessment year 2024, the homestead market value exclusion reduces the taxable market value for all homesteads valued below $413,800. The exclusion is 40% of the first $76,000 of market value, yielding a maximum exclusion of $30,400.
- It is one of the qualifying factors for homeowners to receive the Minnesota Property Tax Refund
- It qualifies you for other programs such as the disabled veterans’ market value exclusion and senior citizens’ property tax deferral
- It could save you money on your insurance, as insurance rates are typically lower for principal residences
- When you sell it provides an exemption from capital gains tax on the the first $250,000 for a single person and $500,000 for a married couple
- Your homestead (or a portion of those assets) may be exempt from being seized and sold to pay a judgment, debt or liability
I remember our son called a couple years after they bought their first home, concerned that their taxes had gone up. They bought at the end of December so had until December of the following year to file for taxes payable the next year… they forgot about it and paid the penalty of higher taxes for a year.
Here is a link to more information on Homestead Classification from the Minnesota Department of Revenue.
Sharlene Hensrud, RE/MAX Results – firstname.lastname@example.org