homestead tax? why should I pay?

Asked by bob, Nebraska Wed May 7, 2008

I am moving from nebraska to grand rapids in july and am looking for a house. many places I am looking at I see that they are not exempt from homestead taxes as the owner doesnt live there and thus have much higher tax rates. how do i get around this and pay 100% homestead as I will be moving in after the may deadline?

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Nancy Caldera, Agent, Austin, TX
Thu May 8, 2008
I live in the state of Texas and here you would have to pay the taxes for the remainder of the year at current rate , also apply for Homestead exemption and then that would take effect next year.
0 votes
John K. Elli…, , Lansing, MI
Thu May 8, 2008
Hi Bob,
Normally, when you purchase a home, the property owner files a Principal Residence Exemption Affidavit, Form 2368, with the township or city assessor. The exemption information is then posted to the local property tax roll. So, when you move into a property, all you have to do is insure that either your title company or you file the necessary Principal Residence Exemption documentation with the city assessor's office to receive the Principal Residence Exemption for the appropriate tax rate on an owner occupied residence. See: http://www.michigan.gov/taxes/0,1607,7-238-43535_43538---,00.html
Read on:
I recently purchased a home. Will my taxes on this home be about the same amount as the prior owner's taxes?
No. Until 1994, property was valued for tax purposes at half its market value. This is called the "State Equalized Value" or SEV. That year, voters passed Proposal A, which limited the growth of property tax assessments. The formula under Proposal A keeps the taxable value of a property from growing as fast as the SEV. This gap can increase over time. However, when the property is sold, the taxable value is uncapped and jumps up to the SEV, but only for that year. There could be a substantial increase in your tax depending on the difference between the Taxable Value and the State Equalized Value of your property; See: http://www.michigan.gov/taxes/0,1607,7-238-43535_43538---,00.html
and...
Because of Proposal A's taxable value cap, the taxable value of property may be significantly less than state equalized value (one-half of estimated market value). But in the year after property is sold, the taxable value of property will increase to the state equalized value. In estimating property taxes on property that will be purchased, use the state equalized value of the property, not the taxable value, or use one-half of the estimated purchase price, and;
Principal Residence Exemption information - allows homeowners an exemption from their local School Operating Millage. Homeowners must file for an exemption and this link will provide additional information on the exemption process. Homeowner's Principal Residence Exemption. 'Nough said!

You may also be interested in a new law here in Michigan: On April 8, 2008, Governor Granholm signed House Bill 4215, enacting Public Act 96 of 2008, which amended Section 211.7cc of the General Property Tax Act of 1893. The amendment enables a person who has established a new principal residence to retain a Principal Residence Exemption (PRE) on property previously exempt as the owner's principal residence that is not occupied and for sale... You can read all about it at the following Web References below.

Hope this answers your questtion. Welcome to Michigan, Grand Rapids is a GREAT PLACE TO LIVE!

EMORTGAGECENTER
0 votes
Tony Grech, Mortgage Broker Or Lender, Southfield, MI
Thu May 8, 2008
Bob,
As far as I know there is no getting around that, at least for this year. If the taxes are non-homesteaded, that tells me you're probably looking at bank-owned/foreclosed homes. That means you're likely getting a good deal on the home, so take heart in that and bite the bullet for a year on the taxes. Or you could look at only homes that have the homestead exemption in place already (maybe houses on a short sale), although you may or may not pay more. Pick your poison...
0 votes
Jim Johnson, , 78233
Thu May 8, 2008
You should consult with a CPA or tax attorney.
0 votes
Maureen Fran…, Agent, Birmingham, MI
Thu May 8, 2008
You don't get around it.

But what you could do is make your offer reflect the difference in the taxes. Sellers understand that selling a non homesteaded property has negative ramifications for the buyer. You could ask for a credit from the buyer at close, for example.

Remember too, that your taxes could actually increase next year even if homesteaded depending on how long the current owner has been in the house.

Did you check out the state of michigan's site and use the property tax calculator?
0 votes
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