In Michigan, a property’s taxable value may not increase from one year to the next by more than the rate of inflation or 5 percent, whichever is less, until ownership of the property is transferred.
In a market where housing prices decline, the buyer may end up paying less in property taxes, but when the market is booming…the property taxes may increase tremendously!
Here are 5 tips associated with uncapping property taxes:
- Don’t forget to file your transfer tax affidavit – if the property transfer affidavit form is not filed timely (within 45 days of the transfer), a penalty of $5.000 per day (maximum $200.00) applies. Good news though…you chose Access Title Agency, because we take care of this for you!
- Use a Ladybird deed – the use of a Ladybird deed to transfer real property does not cause an uncapping. Look for next months’ newsletter for advice on Ladybird deeds!
- Beware of LLCs – transferring property into and out of a limited liability company will cause an uncapping. Many believe that when the members of the LLC are also the individuals to whom the property is conveyed, that uncapping is avoided, but this is incorrect.
- Remember that there is a transfer of ownership when the deed is signed. This trigger’s uncapping. Don’t just throw your deed in a drawer to record later, or you will have to pay increased adjusted taxes and penalties back to the date of signing.
- Joint Tenancies are good! A transfer that adds a joint tenant to the property does not result in any uncapping if the original owner remains on the title as a joint tenant.
By Alicia Kellogg
Alicia Kellogg is Access Title Agency’s new on-staff attorney for the Traverse City and Suttons Bay, Michigan offices. She graduated cum laude from Western Michigan University. Cooley Law School and is licensed to practice law in the State of Michigan. Contact info: email@example.com or (231) 539-1203.