What is the property tax refund program?

The homeowner’s property tax refund program (sometimes called the “circuit breaker” or the PTR) is a state-paid refund that provides tax relief to homeowners whose property taxes are high relative to their incomes.  If property tax exceeds a threshold percentage of income, the refund equals a percentage of the tax over the threshold, up to a maximum amount.  As income increases:

• the threshold percentage increases,
• the share of tax over the threshold that the taxpayer must pay increases, and
• the maximum refund decreases.

The program uses household income, a broad measure that includes most types of income.  Deductions are allowed for dependents and for claimants who are over age 65 or disabled.

What are recent changes to the program?

The 2008 tax law expanded the homeowner’s property tax refund program, effective for refunds based on property taxes payable in 2009.  The changes lowered the maximum threshold percentage for determining eligibility from 4.0 percent of income to 3.5 percent of income, and increased the maximum refund allowed from $1,800 to $2,310. 

What are the maximums?

For refund claims filed in 2010, based on property taxes payable in 2010 and 2009 household income, the maximum refund is $2,350.  Homeowners whose income exceeds $98,289 are not eligible for a refund.

How are claims filed?

Refund claims are filed using the Minnesota Department of Revenue (DOR) Schedule M1PR.  Claims filed before August 15, 2010, will be paid beginning in late September 2010.  The deadline for filing claims based on taxes payable in 2010 is August 15, 2011; taxpayers filing claims after that date will not receive a refund.  Forms are available online at DOR’s web site, under “Forms and Instructions” (www.taxes.state.mn.us). 

What is the average refund and total amount paid?

Statewide Homeowner Property Tax Refunds

Filed in 2008
(based on 2007 incomes and payable 2008 taxes, most recent data available)

Number of returns

Total refund amount

Average per return

Under 65 years old

212,855

$145.7 million

$684

Senior/disabled

129,749

$88.4 million

$682

Total: all homeowners

342,604

$234.1 million

$683

How do refunds vary depending upon the filer’s income and property tax?

The following table shows the refund amount for two example families with different incomes—one family in the metro area and one in greater Minnesota.  Although the property tax refund threshold, copayment rates, and maximum refund amounts are the same statewide, the average residential homestead property tax in the metro area is higher than in greater Minnesota.  The metro area family has payable 2010 property taxes of $3,270, a typical amount for the metro.  The family in greater Minnesota has payable 2010 property taxes of $1,670, a typical amount for greater Minnesota.  Taxpayers who are over age 65, disabled, or have dependents are allowed a subtraction from income in determining the refund.

Married couple, both under age 65, two dependents

Example refunds for claims to be filed in 2010,
based on taxes payable in 2010 and 2009 income

Metro area

Greater Minnesota

Taxpayer #1

Taxpayer #2

Taxpayer #3

Taxpayer #4

1

Estimated typical market value of home

$264,000

$264,000

$169,000

$169,000

2

Gross income

$35,000

$75,000

$35,000

$75,000

3

Deduction for dependents

$9,855

$9,855

$9,855

$9,855

4

Household income

(2 – 3 = 4)

$25,145

$65,145

$25,145

$65,145

5

Property tax

$3,270

$3,270

$1,670

$1,670

6

Statutory threshold percentage

2.4%

3.2%

2.4%

3.2%

7

Threshold % x income
(4 x 6 = 7)

$603

$2,085

$603

$2,085

8

Property tax over threshold (5 – 7 = 8)

$2,667

$1,185

$1,067

$0

9

Statutory copay percentage

35%

45%

35%

45%

10

Taxpayer copay amount (8 x 9 = 10)

$933

$533

$373

NA

11

Remaining tax over threshold (8 – 10 = 11)

$1,733

$652

$693

NA

12

Maximum refund allowed

$1,800

$1,410

$1,800

$1,410

13

Net property tax refund

$1,733

$652

$693

$0