Why the Homestead Exemption Matters
“If the Property Tax status is part- or non-homestead classification in the year of closing, Seller __ Shall __ Shall Not pay the difference between the homestead and non-homestead.”
–lines 78. – 79.; 2015 MAAR-approved Purchase Agreement
At least for more expensive Minnesota homes, the rule on non-homestead taxes is blissfully simple: it doesn’t apply over $413,800.
Below that amount, Buyers who: a) are purchasing a non-homestead property; and b) have negotiated for the “Seller shall pay” option (above) in their Purchase Agreement, are entitled to collect the difference between homestead and non-homestead taxes from their Seller.
2nd Homes and Rentals
In practice, “non-homestead” properties are usually either second (vacation) homes, rentals owned by investors, or bank-owned foreclosures.
Occasionally, too, a long-vacant home that is part of an estate sale will lose its homestead status before coming on the market.
The difference in property taxes between “homestead” and “non-homestead” status is typically less than a couple hundred dollars.
Filing Deadline Approaches
Notwithstanding the nominal difference in property taxes, there are other reasons for owner-occupants to homestead their Minnesota properties.
They include lower home insurance premiums for owner-occupants; establishing Minnesota for domicile (estate tax) purposes; and, in the event of bankruptcy, qualifying for exclusions available under Minnesota law.
The filing deadline is December 15.
Tick, tock . . .
