Tax panel considers expanding refunds for big property tax hikes

Sure, your property taxes may have gone up last year. But did they go up enough to earn you a special refund?

Minnesota tax law has something called “targeting,” which directs property tax relief to homeowners who have experienced a property tax increase of 12% or more, year over year, if the increase is over $100. Homeowners could get 60% of the increase back, up to a maximum refund of $1,000.

Rep. John Huot (DFL-Rosemount) would like to see that refund get bigger and be more widely available. That’s the focus of HF3959 that would reduce the 12% threshold to 6%, and increase the maximum refund to $2,500.

And if that sounds familiar, it could be because the Legislature did something similar in 2023. But that was a temporary change for refunds payable only that year.

On Thursday, the House Taxes Committee laid the bill over for possible omnibus bill inclusion.

“Because it provides direct property tax relief, it does not shift the tax burden from one property owner to another,” said Paul Eger, senior vice president of government affairs for the Minnesota Realtors Association. “This will make homeownership a bit more affordable for many Minnesotans.”

Possible reasons for rising property taxes took up much of the discussion of the bill. One was the current state of the housing market.

“A lot of data says that people are staying in their homes longer than ever before,” said Rep. Michael Howard (DFL-Richfield). “And a big reason for that is they don’t have other homes to move to that fit their needs and their life. The core challenge in our housing market is a massive supply-demand mismatch.”

Rep. Mike Wiener (R-Long Prairie) believes the core issue is governmental.

“The unfunded mandates from the state are what’s driving these property taxes up,” he said. “If we’re not willing to pay for this at the state level, we can’t push the burden down onto the counties. … I think this is a good bill, but I don’t think it goes far enough.”

The Revenue Department estimates that the change would reduce the General Fund by $13.5 million in Fiscal Year 2027, that the approximately 100,000 taxpayers currently earning the refund would receive an average refund increase of $130, and that the number of taxpayers claiming the refund would increase to 140,000 in the first year.

Oh, and… In case you’re wondering if home improvement projects that have added to the value of your home would make you eligible for an increased property tax refund, the answer is no. Homes in that situation don’t qualify.