Approved by Michigan voters in 1994, Proposal A significantly altered Michigan Property Tax Law. Prior to 1995, taxes were calculated on State Equalized Value, which approximates half of Market Value. Beginning in 1995, taxes were based on a new value: Taxable Value. By law, the increase in Taxable Value cannot exceed the lesser of two factors: Consumer Price Index (C.P.I.) or 5%. However, some circumstances will alter that computation, namely: Transfers of ownership, new construction or demolition. If a transfer of ownership occurs in 2005, then the Capped Value no longer applies. For 2006, the State Equalized Value will be the new Taxable Value. We refer to this as an “uncapping of taxable value”. The new purchaser will be subject to a new starting base Taxable Value. Barring any physical changes to the property (new construction/demolition), the taxable value will again increase at the lesser of two rates: C.P.I. or 5%. Assessed Values, as equalized, are still required to be at 50% of Market Value. Assessments are reviewed and updated annually. Increases in assessments are not subject to any cap or formula.

Name Change from Homestead Exemption to Homeowner’s Principal Residence Exemption

PA 140 of 2003 provides that, effective January 1, 2004, the word Homestead has been removed from the exemption statutes and has been replaced by the words Principal Residence. While P.A. 140 of 2003 uses the words Principal Residence, the exemption will be known as the Homeowner’s Principal Residence Exemption so that a renter does not mistakenly file for the exemption.

• The filing deadline for the Homeowner’s Principal Residence Exemption is May 1 of the current year. You must own and occupy by May 1st.
• You may claim the exemption for only one residence.
• If you purchase a previously owned home in which the prior owner benefited from the exemption, you are entitled to the benefit of that exemption, even if you occupy AFTER May 1. However, you will need to file an affidavit in order to continue receiving the exemption. You must meet all of the pertinent criteria in order to receive the exemption for the succeeding length of ownership.
• Property which is VACANT and CONTIGUOUS to your principal residence is eligible for the exemption.

What are the eligibility requirements for receiving the Homeowner’s Principal Residence Exemption?

You may claim the homeowner’s principal residence exemption if you meet all of the criteria below:

1. You are a resident of the State of Michigan.
2. You own and occupy the home as your principal residence.
3. Neither you, nor your spouse if you file a joint income tax return, receive an exemption, deduction, or credit substantially similar to the Michigan Homeowner’s Principal Residence Exemption on property you own in another state.
4. You have not filed a non-resident Michigan income tax return.
5. You have not filed a tax return as a resident of another state.

Who is a Michigan Resident?

You are a Michigan Resident if Michigan is your permanent home. Your permanent home is the place you intend to return to whenever you go away. A temporary absence from Michigan, such as spending the winter in another state, does not make you a part-year resident.

What determines Principal Residence?

Michigan Law defines principal residence as the one place where a person has his or her true, fixed, and permanent home to which, whenever absent he or she intends to return and that shall continue as a principal residence until another principal residence is established. In order to verify a persons claim that a particular property is a principal residence, Treasury will accept various documents that, taken together, establish that the person or persons filing the claim occupy the property as a principal residence. Examples include driver’s license, voter registration card, cancelled checks listing the property address, statements such as medical, bank or charge accounts, income tax records indicating the mailing address and insurance policies. No one of these factors taken alone is controlling over any other factor. Documentation needs to verify occupancy between the periods of January 1 to May 1 of each year.

If a residence no longer qualifies for the Homeowner’s Principal Residence Exemption, you must file a Request to Rescind.

Multi-purpose property is not eligible for a full exemption. The Homeowner’s Principal Residence Exemption only applies to property that you own and occupy as your principal residence. If you operate a business in your home, you are not eligible for a 100% exemption. If you write off portions of your home for income tax purposes, you are not eligible for a 100% exemption. If you own and/or operate a Bed and Breakfast, you are not eligible for a 100% exemption. If you have questions about calculating your reduced exemption percentage, please contact the Assessing Department.

ASSESSMENT CHANGE NOTICES are mailed annually (mid-February). This is the taxpayer’s opportunity to review important information pertaining to his or her property. Please be sure to examine valuations, classifications, legal descriptions and exemption status. (How to read your Assessment Change Notice)

Links:
P.R.E. Form
Rescind Form