IMPORTANT RULES TO REMEMBER REGARDING YOUR PRINCIPAL RESIDENCE EXEMPTION:

Alicia Schaub

To give you some background information…

Michigan law creates a cap on the amount real property taxes may increase for residential property that is the principal residence (formerly known as homestead) of a taxpayer. The main rule is that a property owner may only hold the exemption on his or her primary residence.

To claim a principal residence exemption a property owner must file an affidavit with the assessor for the city or township where the property is located. For more information on claiming a principal residence exemption visit www.michigan.gov/pre.

Here, I wanted to specifically discuss the importance of rescinding the principal residence exemption.

A property owner is required to rescind a principal residence exemption when you ­no longer own or occupy the property as your principal residence. The exemption is then removed by December 31st of the year you rescind the exemption.

The forms to claim a principal residence exemption and rescind principal residence are located within the link above.

A claim of principal residence exemption must be rescinded by filing a rescission form no later than 90 days after the property ceases to be used as a principal residence unless the owner is eligible for a conditional rescission. A property owner can claim a conditional rescission for three years on property previously claimed as exempt as the principal residence if that property is not occupied, is for sale, is not leased or available for lease, and is not used for any business or commercial purpose.

An owner who is required to rescind a principal residence exemption but fails to do so is subject to a penalty of $5 per day for each separate failure beginning after the 90 days has elapsed, up to a maximum of $200. MCL 211.7cc(5).

The topic of rescinding a principal residence comes up quite often in two scenarios – divorce and nursing homes.

When a divorce occurs, as long as one of the owners still occupies the home as their principal residence, and the original affidavit was file jointly, the property will still qualify. The owner who no longer owns the property should file a rescission form using their information.

For a person who previously occupied a principal residence but now resides in a nursing home, assisting living facility, or, if residing somewhere solely for the purpose of recovering from an illness or medical treatment, that person may retain the principal residence exemption if they “manifest an intent to return to the property.” The following must also apply:

  1. The owner continues to own the property while residence in the nursing home, assisted living facility, or other location;
  2. The owner has not established a new principal residence;
  3. The owner maintains or provides for the maintenance of the property while residing in the nursing home, assisted living facility, or other location; and
  4. The property is not leased and is not used for any business or commercial purposes.

(Note – active duty members of the military can retain their principal residence exemptions under the same conditions)

Bottom line, it is important not to forget about these guidelines regarding your principal residence, because you can not only save money, but avoid hassle down the road.

By: Alicia Schaub

Alicia Schaub is Access Title Agency’s 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: aschaub@accesstitleagency.com or (231) 539-1203.

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