Real Estate Information Archive

Blog

Displaying blog entries 1-3 of 3

Michigan Property Tax Homestead Exemption Information

Thursday, May 3, 2012
by Tom Stachler,ABR,CDPE - Group One Realty Team

New Changes in the State of Michigan Homestead Exemption Filing Dates

Good News.  The Michigan Association of Realtors was instrumental in helping get this signed yesterday. The former deadline date of May 1st for your homestead exemption and discount on property taxes for Michigan property has been changed.  

See the information below regarding your Michigan Property tax homestead exemption and tax discount.

Legislation Signed by the Governor
5/2/2012

Today, Governor Snyder signed legislation providing homebuyers a fair process when it comes to their property taxes.

Senate Bill 349, sponsored by Senator Dave Hildenbrand (R-Lowell) creates two Principal Residence Exemption (PRE) filing dates; one on June 1st, and the other on November 1st. Additionally, this legislation allows bank-owned properties to retain their PRE so that buyers can qualify at the lower rate of taxation. This is particularly important since foreclosures have flooded the market in recent years.

Below are a few FAQ's regarding the new law:

1) Does the legislation take effect this year?
A) Yes. The new law moves current May 1st PRE filing deadline to June 1st of this year.

2) How does it work?
A) If a homebuyer purchases a Principal Residence and closes on or before June 1st, they can take advantage of a significant tax break by filing for a Principal Residence Exemption.

3) When is the additional filing date? A) November 1st. This allows for tax relief in those communities that still collect a portion, if not all of their non-homestead mills, on the December tax bill.

4) If my client buys after June 1st this year, what can they expect?
A) If a homebuyer purchases a Home after the June 1st filing deadline, and their local tax authority collects all non-homestead mills on the spring tax bill, their property taxes may not reflect the exemption until the next tax bill. If however that local tax authority collects a portion of the non-homestead mills on the winter tax billing cycle, the homebuyer can file for a PRE before the November 1st and exempt themselves from any non-homestead mills collected on the December bill.

5) What about the foreclosure provisions?
A) Banks have the option of maintaining the home's Principal Residence status by filing a Conditional Rescission. By maintaining this exemption status, it's the expectation that borrowers will be able to qualify for financing on these foreclosed properties at the PRE rate and begin paying the lower rate of taxation as soon as they move into the home. To make up for the lost school revenue, banks will be assessed a newly defined tax that will keep the 18 mills (which they presently pay on any foreclosed property) when a property can no longer qualify as a principle residence. It is important for those REALTORS® working with bank clients to let lenders know about the change and communicate the benefit of filing a Conditional Rescission.

Source: Michigan Association of REALTORS®

Michigan Property Tax Homestead Exemption Information

Add Comment

Sellers Might be Exempt on State Transfer Tax

Thursday, November 12, 2009
by Group One Realty Team - Real Estate One

With lower property values due to our struggling economy, many homeowners have been able to take advantage of an exemption contained in the Michigan Transfer Tax Act.  If a seller meets the criteria, they would be exempt from paying the state transfer tax.  Following are the criteria:

  1. The property must have been occupied as a principle residence – classified as homestead property.
  2. The property’s SEV for the calendar year in which the transfer is made must be less than or equal to the property’s SEV for the calendar year in which the seller acquired the property.
  3. The property cannot be transferred for consideration exceeding its “true cash value” for the year of the transfer.


For example:
If the SEV of the homestead principle residence when acquired in 2005 is $100,000 and the current SEV on the property is $90,000, then the first two criteria have been met.  To establish the “true cash value” of the property, you must double the current SEV at the time of transfer.  In this scenario, the true cash value would be $180,000.  If the property sold for $170,000, then the 3rd criteria has been met of Exemption “u” as designated by the Michigan Transfer Tax Act.

If you believe you may be eligible, you have up to 4 years from the transfer date to file for the exemption.  It is also important to note that there are no similar exemptions in the County Real Estate Transfer Tax Act.

To see if you as a seller are eligible, please contact our office for a copy of the “Transfer Tax Exemption Worksheet.”   

As always, thank you for your consideration and referrals.

Add Comment

Selling your home? You may not have to pay the transfer tax

Wednesday, May 7, 2008
by Group One Realty Team - Real Estate One
There is a little know law that exempts a seller from having to pay the normal transfer tax (approx $8.50 per 1K of sale price) at closing if your tax assessment is less at the time of sale than when you purchased the property.

MCL 207.526 (t) provides an exemption from State Transfer Tax for the following written instruments:
A written instrument conveying an interest in homestead property for which a homestead exemption is claimed under either the school code of 1976, Act No. 451 of the Public Acts of 1976, being sections 380.1 to 380.1852 of the Michigan Compiled Laws or the state education tax act, Act No. 331 of the Public Acts of 1993, being sections 211.901 to 211.906 of the Michigan Complied Laws, if the state equalized valuation of that homestead property is equal to or lesser than the state equalized valuation on the date of purchase or on the date of acquisition by the seller or transferor for the same interest in property. If after an exemption is claimed under this subsection, the sale or transfer of homestead property is found by the treasurer to be a value other than the true cash value, then a penalty equal to 20% of the tax shall be assessed in addition to the tax due under this act to the seller or transferor.

Attorney General Mike Cox issued an important opinion this week clarifying the proper application of an obscure exemption contained in the Michigan Transfer Tax Act. The opinion, arising out of a request from Representative Martin Griffin (D-Jackson), should afford certain Home sellers immediate financial relief as Michigan’s real estate market continues its road to recovery.

Exemption “t”, as designated in the Michigan Transfer Tax Act, sets forth that a seller may seek an exemption from paying the state transfer tax if the following criteria are met:

  1. The property must have been occupied as a principle residence, classified as homestead property;
  2. The property’s State Equalized Value (“SEV”) for the calendar year in which the transfer is made must be less than or equal to the property’s SEV for the calendar year in which the transferor acquired the property; and
  3. The property cannot be transferred for consideration exceeding its true cash value for the year of the transfer.

With property values and corresponding SEV declining due to the struggling economy, home owners and real estate agents first took notice of the exemption’s possible applicability under the state transfer tax. However, absent an official interpretation, there was little awareness of its proper application.

The opinion from the Attorney General uses examples to show how the application would apply. One example illustrating application provides:

If the SEV of the principle residence when acquired in 2006 is $74,000.00 and the SEV when transferred in 2008 is $72,000.00 then criteria one and two above are satisfied. You can establish the true cash value by doubling the SEV at the time of transfer. In this case the true cash value is $144,000. If the sale price in 2008 is $140,000.00 then the sale does not exceed its true cash value. All three criteria are satisfied and the exemption would apply.

The Attorney General’s opinion provides immediate relief to home sellers already faced with the reality of declining value on their single greatest asset. The opinion also provides a uniform reading of the exemption that is necessary to provide consistent application among the various Registers of Deeds across the state as they are already receiving filings for the exemption.

Sellers should be cautioned that a request for the exemption that fails to meet all three criteria could bring a penalty equal to 20% of the tax assessed in addition to the tax due. Additionally, no similar exemption exists in the County Real Estate Transfer Tax Act.

Add Comment

Displaying blog entries 1-3 of 3

Syndication

Categories

Archives