Homeownership Tax Benefits

Are you taking advantage of these important benefits?  MN Homes Matter is urging lawmakers to protect homeownership tax benefits and rights!

Mortgage Interest Deduction: A taxpayer that itemizes on their income taxes may take a deduction for the mortgage interest they paid to their lender.  Specifically, they can deduct the interest paid on debt secured by their first or second home. Mortgage interest is deductible up to $1 million of debt used to buy, build, or substantially improve a qualified home (primary or secondary residence). If you took out a mortgage for reasons other than to buy, build, or improve your home, the limitation is $100,000 of debt.  Click here for more information from the IRS

Real Estate Tax Deduction: A taxpayer that itemizes can deduct the property tax paid on owner-occupied residence and any other property not used for business if it is assessed uniformly at a like rate on all real property throughout the community. The proceeds must be for general community or governmental purposes and not be a payment for a special privilege granted or service rendered to the property owner/taxpayer. The taxpayer must have paid them to a taxing authority (either directly or through an escrow account) during the year. The deduction is reduced by any Minnesota property tax refund received. Special assessments are not considered real estate taxes and cannot be deducted. Click here for more information. 

Mortgage Insurance Premium Deduction: This itemized deduction is for mortgage insurance premiums you pay or accrue during approved years in connection with home acquisition debt on your qualified home. Qualified mortgage insurance is mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance. Any premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. Click here for more information.

Capital Gains Exclusion: Selling your home? You may qualify to exclude from your income all or part of any gain from the sale of your primary residence. Your primary residence is the main home in which you live most of the time.  To claim the exclusion, you must meet two tests called the ownership and use tests: During the 5-year period ending on the sale date, you must have:

  1. Owned the home for at least two years (the ownership test)
  2. Lived in the home as your primary home for at least two years (the use test)

You may be able to exclude up to $250,000 of the gain from your income and $500,000 on a joint return.

  • If you can exclude all of the gain, the sale is not reported on your tax return
  • If you have gain that cannot be excluded, it is taxable. 

Click for more information. 

Homestead Market Value Exclusion: The homestead market value exclusion provides a property tax reduction to all homesteads valued below $413,800 based on a formula by shifting a share of the tax burden that would otherwise fall on the homestead to other property types. The exclusion provides for a portion of your homestead’s market value to be excluded from its value for property tax calculations. Click here for more information. 

Homestead Credit Refund Program: AKA the “Circuit Breaker” The homestead credit refund is a state refund completed with your income taxes that provides relief to homeowners whose property taxes are high in relation to their incomes. If the property tax exceeds a threshold percentage of income, the refund equals a percentage of the tax over the threshold, up to a maximum amount.  Homeowners whose income exceeds $107,149 are not eligible for a refund. Click here for more information.

Targeting Property Tax Refund: This refund program provides relief to homeowners who have large property tax increases from one year to the next. A homeowner qualifies if the property tax on the home has increased by 12 percent or more over the previous year’s tax liability and if the increase exceeds $100. The refund equals 60 percent of the tax increase over the greater of 12 percent of the previous year’s tax or $100. The maximum refund is $1,000. Click here for more information.

Relative Homestead Classification: MN Statutes 273.124, subd. 1(c) For the classification of property for the purposes of taxation, residential real estate that is occupied and used for purposes of a homestead by a relative of the owner is a ‘homestead’ but only to the extent of the homestead treatment that would be provided if the related owner occupied the property.  Relative is defined as a parent, stepparent, child, stepchild, grandparent, grandchild, brother, sister, uncle, aunt, nephew, or niece. This relationship may be by blood or marriage. Click here for more information.

Connect With Us

You can contact us at info@mnhomesmatter.com