|
| Resources |
When can you claim a homested exemption from property taxes for your cottage?
|
The gang |
Owners of Michigan property do not pay school taxes on their principal residence. This article discusses when you may claim that exemption.
It is a big advantage to be able to claim the homestead exemption (now referred to as the "homeowner's principal residence exemption" which I shorten to HPRE). The HPRE normally reduces one's real estate taxes reduced by one-third to one-half. The HPRE is not prorated: a property either is your principal residence (in which case you receive 100% exemption) or it is not (in which case you receive no exemption).
In order to claim the HPRE:
1. one must be an "owner" of the property
2. the property must be one's "principal residence on December 31 of the prior year"
3. One must file an HPRE claim with the assessor by May 1 of the current year
If these requirements are met, then the property is entitled to a 100% HPRE exemption.
Requirements 1 and 3 are quite clear. Determining whether requirement 2 ("is the property your 'principal residence’?”) has been met can be quite difficult.
Michigan’s property tax law defines “principal residence" as follows:
“Principal residence” means the 1 place where an owner of the property 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.
So, whether your Michigan property is your principal residence depends upon your intention. Down the slippery slope we go. Because it is a test of intention, no simple, mathematical test determines whether your Michigan cottage or your other residence is your principal residence. Rather, Michigan law determines your residency intention by considering many factors which, taken together, provide evidence of your intent. Among these factors:
• Do you have a Michigan driver’s license?
• Are you registered to vote in Michigan?
• Do you use your Michigan address as your home address for tax returns and other business correspondence?
• How much time do you spend in Michigan compared to elsewhere (this is not a critical factor, especially if you travel frequently)
The Michigan Treasury Department publishes a helpful booklet entitled Guidelines for the Michigan HPRE. The brochure generally is accurate, but (surprise!) is written from the government’s perspective.
A follow-on question is whether a husband and wife may reside in two states (e.g. the husband claiming a principal residence in one state and the wife claiming the cottage as her residence). I took a case on these facts to the Michigan Court of Appeals and prevailed. Treasury responded by having the law changed, so it is now much more difficult for a couple to have two principal residences. It is not, however, impossible….
Stuart J. Hollander (2006) |
|
|
