A bill authored by Senator Steve Drazkowski (R-Mazeppa) aimed at providing direct property tax relief to Minnesota homeowners received its first hearing Tuesday in the Senate Taxes Committee. The bipartisan proposal, Senate File 105, seeks to change how ROTH retirement income is defined when determining eligibility for property tax refunds, potentially increasing the amount of relief many families receive.   

“Our current property tax refund system isn’t congruent or parallel with the renter side, and that’s a problem,” Senator Drazkowski said. “Tax policy should be clear and consistent for every taxpayer in Minnesota. This is especially true right now, with inflation and rising costs stretching families and small businesses to the limit. Minnesotans are already overtaxed and this bill is one way we can give the hardworking taxpayers of this state the relief they need and deserve.” 

The Drazkowski bill would exclude Roth retirement distributions from the calculation of household income used to determine property tax refund amounts. 

When homeowners apply for a property tax refund (PTR), they have to report their “household income”, which often includes additional types of income than what they report on their tax return. 

Roth retirement accounts fall under this category. When individuals take money out of a Roth account, they don’t have to pay income tax on it because they already paid when they made their contributions. However, under current state law, homeowners still have to count this Roth money as part of their household income when applying for a property tax refund. This is not the case for renters – Roth IRAs are excluded from household income for the purpose of rent refunds.  

The Drazkowski bill seeks to align homeowner and renter laws so homeowners don’t have to count Roth retirement accounts as household income for property tax refund applications.  

Under the Drazkowski proposal, approximately 11,000 Minnesota homeowners would see an average increase of $180 in their property tax refunds. The change would take effect for refunds based on property taxes payable in 2025. This would amount to $2 million in relief annually, starting in FY 2026.  

Fred Majerus, a constituent from Pine Island, was scheduled to testify in support of the bill, but he was unable to due to technical difficulties in the committee room.  

The bill was laid over for possible inclusion in a larger tax bill later this session.