What happens to the value of my property once it transfers ownership?
The purchase of your home may not greatly affect the assessed value of your new property (contrary to popular opinion). The local assessor may not come out and reassess your property after they find out that a transfer has taken place, and your property’s assessed value most likely WILL NOT automatically become 50% of what you paid for your property. What will happen, however, is still somewhat of a shock for some who are not aware of Proposal A.
Section 211.27 a of the Michigan Compiled Law states: “Upon transfer of ownership of property after 1994, the property’s taxable value for the calendar year following the year of the transfer is the property’s assessed value of the calendar year following the transfer.”
What this means to you is that if you purchase your property this year, with a current assessed value of $53,400, and a taxable value of $48,200, in the year following the transfer you will be paying taxes on the new assessed value, which will include the market adjustment.
That new assessed value will serve as your base for all of the future adjustments on both your assessed and taxable values.
It becomes a matter of “buyer beware,” as on several occasions most buyers are not made aware by anyone in their sales transaction that this is going to happen.
Most find themselves in difficult positions when they were led to believe that their property taxes were going to be a far less amount than the amount they are actually billed. This is a process that is mandated by the State Tax Commission. Local assessors must abide by these regulations.
What is the Principal Residence Exemption Affidavit? (formerly the Homestead Exemption)
This affidavit allows you to claim an exemption of 18 mills on your school property taxes. For your homestead to be eligible, you must OWN AND OCCUPY it as your legal principal residence on or before May 1st of each year. You may claim an exemption for only ONE principal residence and for eligible agricultural property. All principal residence affidavits are ultimately filled with the State Tax Commission, who then verifies that each property owner is in fact only claiming one Principal Residence Exemption.
So how will you benefit from filing a Principal Residence Exemption Affidavit?
Here’s an example of what your taxes would be on a property with $50,000 taxable value which did not claim a principal residence exemption, compared to the same property WITH a principal residence exemption:
$50,000 Taxable Value
x 39.58 Principal residence Millage Rate
$1,979 Total Tax Bill for One Year
As you can see from this example, it is very beneficial to file a Principal Residence Affidavit for your principal property!
Where do you file a Principal Residence Exemption Affidavit?
A principal residence affidavit should be filed with the local assessor of the city or township in which the property is located. In most cases, the Property Transfer Affidavit and Principal Residence Exemption Affidavit are filed with the assessor at the same time.
What if I did own and occupy my residence on or before May 1st, but did not file a principal residence affidavit?
PublicAct74 of 1995 provides for an exemption to be filed by mail or in person at the July or December Board of Review for the year of the claim, or the following year’s July or December Board of Review. To petition the Board of Review, you must submit a signed Affidavit for Principal Residence Exemption. A petition to the December or July Board of Review must be made at least five days before the date of the Board of Review.
I moved to a different home after May 1st, may I claim my new home?
No. Since you did not own and occupy the home before the filing date, you may not file a claim. However, the previous owner may have claimed the property and that exemption remains in effect until December 31st. You may file a claim for your new home before May 1 of the following year by filing a Principal Residence Exemption Affidavit.
I own two homes in Michigan. For which home do I claim exemption?
Claim the exemption for the home you occupy as your principal residence.