Property taxes: homestead vs. rental.

On this page

1. Class rates that matter for homes
2. The real difference: the homestead exclusion
3. Where the five towns sit
4. Homestead: how to get it and keep it
5. Paying and late penalties
6. The homeowner refund
7. My advice

Class rates that matter for homes

Source: Minn. Stat. 273.13, subds. 22 and 25. The class rate sets your "tax capacity." Local levies then determine the actual bill.

The real difference: the homestead exclusion

Homesteads get the Homestead Market Value Exclusion, which lowers the taxable value. Per the Minnesota Department of Revenue:

• For homes valued at $95,000 or less, the exclusion is 40% of market value, up to $38,000.
• Above $95,000, the exclusion shrinks by 9% of the value over $95,000.
• It phases out completely at $517,200.

Example: on a home valued at $300,000, the exclusion is $38,000 minus 9% of $205,000, or $19,550. As a homestead, the home is taxed as if it were worth about $280,450. As a rental, it's taxed on the full $300,000.

Where the five towns sit

Median effective rates are Ownwell estimates, the same figures used in the monthly cost calculator. *Two Harbors uses Ownwell's Minnesota statewide median because its local figure looked unreliable. A specific home's bill can be well above or below these, so check the county's records for any home you're considering.

Homestead: how to get it and keep it

• Who qualifies: you own the property, it's your sole or primary residence, and you're a Minnesota resident.
• Deadline: apply to your county assessor by December 31 to qualify for taxes payable the next year. You don't reapply every year.
• One per couple: a married couple can have only one homestead in Minnesota.
• Changes: notify the assessor within 30 days if you move, sell, or your marital status changes.

Paying and late penalties

If the annual tax is over $100, the first half is due May 15 and the second half October 15 (Minn. Stat. 279.01). Late penalties are steeper for non-homesteads: the first penalty is 2% for homesteads and 4% for non-homesteads, and total penalties can reach 8% and 12%.

The homeowner refund

Homesteaded owners may qualify for Minnesota's Homeowner's Homestead Credit Refund (Form M1PR). For 2025, household income had to be under $142,490 for the regular refund. A separate special refund applies if your net property tax rose more than 12% (and at least $100) on the same home, for reasons other than improvements you made. Rentals don't qualify.

My advice

• Buying to live in: file for homestead right after closing. Don't wait for the county to catch it.
• Buying to rent: rebuild the tax number without the homestead exclusion before you trust any cash-flow math. The listing's figure likely assumes the seller's homestead.
• Buying a rental in Duluth: the City requires a rental license (City Code Sec. 29A-28), and a new owner must apply to transfer an existing license within 30 days of the purchase (Sec. 29A-32).