6 Senior Property Tax Deferral Rules Minnesotans 65 and Older Should Read First
Under Minnesota’s senior property tax deferral, you pay property tax equal to 3% of your household income, and the rest gets deferred.
It works like a loan, not a gift, so it’s worth knowing the rules before you sign up.
Here are the senior property tax deferral rules Minnesotans 65 and older should read first.
Note: This is general information, not legal or tax advice. Program rules and dollar amounts are subject to change, so confirm the current details with the Minnesota Department of Revenue.
1. Five-Year Homestead Test
The first hurdle is how long you’ve lived in your house.
You need to have owned and lived in your home for the last five years.
Your home also has to have been homesteaded for those five years.
The state counts the five years before the year you first apply.
If you own the home with a spouse, only one of you has to meet that test.
Homestead status comes from your county assessor, and you apply by December 31 for taxes payable the next year.
That December 31 date is separate from the November 1 deadline in rule 6.
2. Age Requirement
A 66-year-old homeowner with a 61-year-old spouse misses the deferral’s age rule.
A 62-year-old spouse would clear it.
You have to be 65 or older in the year you apply, and you may apply in the year you turn 65.
If you’re married, one of you must be 65 or older and the other at least 62.
Revenue measures age in the year you apply, while state law checks the 65 mark when your first deferral is granted.
3. Household Income Cap
The deferral’s ceiling is $96,000 in total household income.
A household at exactly $96,000 qualifies.
A household at $96,001 doesn’t.
The year that matters is the calendar year before the year you first apply.
What Counts as Household Income
The deferral counts more than the income on your tax return.
It starts with your federal adjusted gross income and adds money that never shows up there.
It adds nontaxable income, Social Security benefits, Supplemental Security Income, veterans benefits and workers’ compensation.
It adds distributions from a traditional or Roth retirement account too, unless they’re already in your adjusted gross income.
The household is you and a spouse who lives in the same home, and a dependent’s income is left out.
4. Lien and Debt Limits
Some debts on your home can keep you from qualifying.
A reverse mortgage or a life estate disqualifies you.
So do state or federal tax liens and judgment liens.
Your mortgage and other liens have to stay within 75% of the assessor’s estimated market value.
That total includes unpaid special assessments and delinquent property taxes, penalties and interest, but not current-year property taxes.
A mortgage that secures future advances qualifies only when its credit limit keeps you within that same line.
On a home the assessor values at $280,000, that line sits at $210,000.
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5. 3%-of-Income Payment Rule
Participants pay property tax equal to 3% of their total household income, based on income from the year before.
The state pays the rest as a loan.
Say your household income was $60,000 and your property tax bill is $4,200.
You'd pay $1,800, and the state would lend the other $2,400.
The interest rate varies but tops out at 5%.
Interest starts accruing on September 1 of the year the taxes are payable.
A lien on your home secures the loan.
Deferred taxes and interest, added to your mortgage and other liens, can't top 75% of the assessor's current estimated market value.
The state also applies certain refunds and payments to the loan, including income tax refunds, property tax refunds, political contribution refunds and lottery winnings over $600.
6. November 1 Deadline
Property tax deferral applications are due on or before November 1.
An approved application defers the following year's property taxes.
You can apply online or mail in Form CR-SCD, the senior deferral form.
Include a copy of this year's property tax statement.
You also need a report on any mortgages, liens or judgments against your property, and which report depends on how your land is recorded.
For Torrens property, that report is a current certificate of title.
For abstract property, it's an owners and encumbrances report from a licensed abstracter.
Either one has to be dated within 30 days of your application.
Not sure which type you own? Your county recorder can tell you.
Keeping Your Deferral
Approval brings a few duties that last as long as the deferral does.
There's no yearly reapplication once you're accepted.
But if your household income for the previous calendar year tops $96,000, you have to notify the Department of Revenue in writing by July 1.
The state won't defer your taxes in any year you don't meet the qualifications.
You can resume later once household income for a calendar year is $96,000 or less, with written notice by July 1 of the following year.
Questions go to Revenue's Property Tax Division through its contact page.
What Ends the Deferral
The deferral stops when one of four things happens.
A sale or transfer of the property ends it, and so does the death of all qualifying homeowners.
You can also end it yourself by notifying the Department of Revenue in writing.
A home that stops qualifying as a homestead ends it too.
After a sale, a transfer or a death, the loan and interest come due within 90 days.
If you cancel the deferral or the home loses its homestead status, you have one year to repay.
The payoff covers the deferred taxes and special assessments, plus penalties, interest and recording fees.
Pay on time and no additional interest is added, though the interest that built up during the deferral is still part of what you owe.
If you miss that window, the regular rules for collecting unpaid property taxes apply.
If you cancel, you may reapply later if you meet the qualifications.
FAQ: Minnesota Senior Citizens Property Tax Deferral Requirements
What are the Minnesota senior citizens property tax deferral requirements?
You must be 65 or older, own and live in your home for five years, and have household income of $96,000 or less.
Your home also can't have a reverse mortgage, a life estate, or certain liens.
Do you have to reapply for the deferral every year?
No. Once you're accepted, you don't need to reapply yearly.
You do have to notify the Department of Revenue by July 1 if your household income for the previous calendar year went over $96,000.
When is the deadline to apply?
Apply by November 1 to defer your property taxes the following year.
Is a deferral the same as having your property taxes forgiven?
No. The state pays the remainder of your bill as a loan, and you repay it with interest.
The interest rate varies but doesn't exceed 5%.
What happens to the deferral when you sell your home?
A sale ends the deferral.
State law makes the deferred taxes and interest due within 90 days of a sale or transfer.
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