Property taxes in Michigan are relatively high compared to other states. According to the Tax Foundation, Michigan ranked ninth in the country in 2008 in terms of property taxes as a percentage of median home value at 1.45%, and tenth in terms of property taxes as a percentage of median homeowner’s income at 3.70%. But there are certain tax breaks that can help to alleviate the burden, including the principal residence exemption and the homestead property tax credit.
Principal residence exemption
The principal residence exemption, formerly known as the homestead exemption, exempts your principal residence from the local school district tax up to 18 mills. Mills are the taxes per each $1,000 of assessed value of your home. For example, in Flint, in Genesee County, in the Carmen-Ainsworth School District, the 2008 millage rate is $32.2352, so the principal residence exemption would save you up to $580.23 in property taxes. You can find the millage rates for your location on the Michigan Department of Treasury website under Property Tax Estimator and Millage Rates.
In order to qualify for the principal residence exemption, you must be a Michigan resident and must own and occupy the property as your principal residence. To claim the exemption you need to file Form 2368 – Principal Residence Exemption (PRE) Affidavit with your local city or township tax assessor by May 1. Normally when you purchase a home the closing agent will provide this form.
When you claim the exemption by the May 1 deadline, the exemption reduces your property taxes for that year. If you purchase a home after May 1, the previous owner may have claimed the exemption and it will be in effect until December 31. Then you would need to file Form 2368 to claim the exemption the following year.
Homestead property tax credit
You can claim a property tax credit when you file your annual Michigan state income tax return. To qualify for the credit you must be a resident of Michigan for at least six months during the year and your income must be less than $82,650. You can claim the credit on your permanent home, whether you own or rent the home. If you own the home you pay the property taxes directly, and if you rent you pay them indirectly through your rent payment.
To claim this credit you need to file Form MI-1040CR with your annual Michigan state income tax return. The amount of the credit is calculated by comparing your household income with your property taxes. The credit provides the greatest property tax relief to senior citizens, disabled or blind persons, and disabled veterans and surviving spouses of veterans. You will need your property tax statement to complete Form MI-1040CR if you own your home. If you are a veteran, a surviving spouse, or blind, you also need to complete Form MI-1040CR-2.
If you are not required to file a Michigan state income tax return, you can still claim the homestead property tax credit. In this case you should file Form MI-1040CR, and Form MI-1040CR-2 if applicable, as soon as you know what your income was for the year.
Property tax deferment
Some Michigan residents can defer payment of their summer property taxes until February 15. To qualify for the deferment, your total household income for the preceding tax year must be $40,000 or less (this is the amount in effect as of November 2009) and you are at least age 62. You also qualify if you are totally and permanently disabled or blind, or you are in the military service, are a veteran or the surviving spouse of a veteran.
To apply for the deferment of your summer taxes, you need to file Form 471 – Application for Deferment of Summer Taxes with the treasurer of your city, township or village. If you are on active military service you can apply for deferment of your Michigan property taxes by filing Form 2700.
If you are 65 or older, or you are totally and permanently disabled, and have been a Michigan resident for at least five years, you may qualify for a deferment of special property tax assessments, such as assessments for curbs, sidewalks, street paving and sewers. To qualify, your total household income must be below a certain amount ($21,147 in effect for 2009 and indexed for inflation each year) and the special assessment must be $300 or more. To apply for this deferment you need to file Form 2748. This deferment is considered a loan from the State of Michigan and a lien is placed on your property until the loan is repaid. This loan is subject to interest at one-half percent per month.
Sources:
Form 471 – Application for Deferment of Summer Taxes – Michigan Department of Treasury
Form 2368 – Principal Residence Exemption (PRE) Affidavit – Michigan Department of Treasury
Form 2700 – Application for Property Tax Relief During Active Military Service as
Permitted Under the Federal Soldiers and Sailors Relief Act – Michigan Department of Treasury
Form 2748 – Senior Citizen or Totally and Permanently Disabled Person’s
Affidavit Requesting Special Assessment Deferment – Michigan Department of Treasury
Frequently Asked Questions (FAQs) About Deferred Special Assessments – Michigan Department of Treasury
Frequently Asked Questions (FAQs) About Summer Tax Deferment – Michigan Department of Treasury
Homestead Property Tax Credit Information – Michigan Department of Treasury
Michigan Homestead Property Tax Credit Claim MI-1040CR – Michigan Department of Treasury
Michigan Homestead Property Tax Credit Claim for Veterans and Blind People MI-1040CR-2 – Michigan Department of Treasury
Principal Residence Exemption – Michigan Department of Treasury
Property Tax Estimator and Millage Rates – Michigan Department of Treasury
Property Taxes on Owner-Occupied Housing by State, 2004 – 2008 – The Tax Foundation
Reference:
- Guidelines for the Michigan Homeowner’s Principal Residence Exemption Program – Michigan Department of Treasury: www.michigan.gov/documents/2856_11014_7.pdf
- Michigan 1040CR-2 – State of Michigan: www.michigan.gov/documents/taxes/MI-1040CR-2booklet_260665_7.pdf
- Services for Seniors – Michigan State Legislature: www.legislature.mi.gov/documents/publications/ServicesforSeniors.html#Tax%20Deferments
