More on Homestead Market Value Exclusion

I had previously discussed the Homestead Credit Aid program being shifted to a Homestead Market Value Exclusion. In that blog I described the credit aid program and also the concept of the new Market Value Exclusion but some of the details were a bit unclear. There will continue to be uncertainty with the outcome until the final numbers are presented. I hope to clarify some of that overall picture.

As previously stated the new exclusion program deals with Homestead Properties (owner occupied) by reducing their (taxable) market value. The maximum exclusion is 40% for properties have an estimated market value of $76,000 or less. The exclusion then provides for a sliding scale with the percentage of reduction decreasing as the value of the home increases. The exclusion formula declines to $0 when the threshold of $413,778 in market value has been reached. In very general terms the formula can be looked at with the following chart:

Estimated Market Value / Taxable Market Value / % Decrease
76,000 / 45,600 / 40%
100,000 / 71,760 / 28%
150,000 / 126,260 / 16%
200,000 / 180,760 / 10%
250,000 / 235,260 / 6%
300,000 / 289,760 / 3%
350,000 / 344,260 / 2%
400,000 / 398,760 / 0%
(Percentages have been rounded.)

The obvious conclusion is there will be a reduction in taxable value for individual properties. The less obvious conclusion is there is less taxable value in a taxing jurisdiction as a whole. With the reduction in taxable values there will be an increase in the tax rate.

Added to this equation are other changes that affect overall taxable value. These include a reduction in the Estimated Market Value of properties in general. The number of Homestead properties (increases or decreases). The overall ratio of high to low valued Homestead properties and any changes to the jurisdiction such as detachment and new construction.

The county has estimated that the taxable market value of property in Breezy Point has decreased by about 14.2%. The tax rate is estimated to increase from 33.895% to 39.719% for 2012. Keep in mind this is only the city tax rate. The county and school district have a tax levy. Given the school referendum we’ll see increases there which are in addition to and outside of these issues. With the city rate being calculated it is still difficult to know or predict how individual properties will fare and a great deal depends on the “new” taxable value of a property. I anticipate that most properties will see an increase in property taxes even with the flat levy request being proposed by the city.