how Michigan property taxes work series – homestead exemption – part 8

The State of Michigan and Metro Detroit has a complex property tax system.  But to explain it….. Basically your Metro Detroit home is either homesteaded or non homesteaded.    Homestead basically means that you live in the Metro Detroit home as your principal residence.  Our Michigan government has seen fit to give you a break on your Michigan property taxes if you live in the house as your principal residence.  It is a reduced rate on your Michigan property taxes if it is a “homesteaded property”.  You get a homestead exemption from the state.  You’ll then pay less on your Metro Detroit property taxes.

Non-homestead means that it is a commercial property, a rental property.  It means that you are going to pay full price on your Michigan property taxes on your Metro Detroit real estate.  But what happens if the property is duplex, or quad, or a property with two homes on it, or if you rent part of the property out?  How much of it can you claim as your homestead exemption?  How much will it reduce your taxes?

Here are the Michigan Homestead exemption Rules for how much you can claim of a property.

What about properties that have two homes one it?  What about duplexs?  What if I rent out the house to some friends?  Here are the rules right from the Principal Residence Exemption (PRE) Affidavit

If you own and live in a multi-unit or multi-purpose property (i.e., a duplex, a quadplex, or apartment building, or a storefront with an upstairs flat), you can claim an exemption only for the portion that you use as your principal residence. Calculate your portion by dividing the floor area of your principal residence by the floor area of the entire building.

If the parcel of property you are claiming has more than one home on it , you must determine the percentage that you own and occupy as your principal residence. A second residence on the same property (e.g., a mobile home or second house) is not part of your principal residence, even if it is not rented to another person. Your local assessor can tell you the assessed value of each residence to help you determine the percentage that is your principal residence.

If the parcel of property you are claiming has more than one home on it , you must determine the percentage that you own and occupy and the renters enter through a common door or your living area to get to their rooms, you may claim a 100 percent exemption if less than 50 percent of your home is rented to others who use it as a residence. However, if part of the home was converted to an apartment with a separate entrance, you must calculate the percentage that is your principal residence by dividing the floor area of your principal residence by the floor area of the entire building.

If you rent part of your home to another person , you may have to prorate your exemption. If your home is a single-family dwelling and the renters enter through a common door or your living area to get to their rooms, you may claim a 100 percent exemption if less than 50 percent of your home is rented to others who use it as a residence. However, if part of the home was converted to an apartment with a separate entrance, you must calculate the percentage that is your principal residence by dividing the floor area of your principal residence by the floor area of the entire building.

 

How Michigan property taxes work- homestead taxes and non-homestead taxes - part 1

How Michigan property taxes work – the difference between SEV and taxable value part 2 

How Michigan property taxes work – will my property taxes go up after I buy a house – part 3

How Michigan property taxes work – buy a foreclosure with non-homestead taxes – part 4

How Michigan property taxes work – how to read and understand your Metro Detroit property tax statement part 5

How Michigan property taxes work – SEV state equalized value – part 6

how Michigan property taxes work – Taxable value – part 7

 

I hope you are starting to learn more about our Michigan Property tax system and how to read your tax bill

Russ Ravary your metro Detroit real estate agent

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