Property Tax Exemption Extended To Nursing Home Residents

Generally, the Michigan principal residence exemption provides that a taxpayer’s principal residence is not subject to the “tax levied by a local school district for school operating purposes.” MCL 211.7cc. This amounts to a partial exemption for a taxpayer’s principal residence, resulting in the application of a lower millage rate to that property than the rate that applies to property that does not receive the exemption.

Under the statutory definition, 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.” MCL 211.7dd(c).

State law sets forth a number of provisions governing the principal residence exemption, including a requirement that the taxpayer own the property on the day the exemption is claimed, prohibiting the taxpayer from claiming any similar exemption on property in another state, and prohibiting the taxpayer from filing a nonresident Michigan income tax return. To claim the exemption, a property owner must file a form known as the principal residence exemption affidavit with the taxing jurisdiction.

Several amendments adopted have affected the principal residence exemption.

Effective April 10, 2008, in addition to a property owner’s current principal residence, a property owner may claim an exemption for up to three years on property previously exempt as the owner’s principal residence if that property is not occupied, is for sale, is not leased, and is not used for any business or commercial purpose.

Effective May 1, 2012, a conditional rescission for three years may also be claimed by a land contract vendor, bank, credit union, or other lending institution that owns property as a result of foreclosure if the property was exempt immediately preceding the foreclosure. The property must be for sale and must not be occupied, leased to any person other than the person who claimed the exemption before the foreclosure, or used for business or commercial purposes.

Other amendments provide exemptions for active duty military personnel. The legislature amended MCL 211.7dd(c) during 2008 to allow members of the military deployed on active duty to rent their homes without jeopardizing their principal residence exemptions.

The legislature recently amended MCL 211.7cc(5), effective October 9, 2012, to allow property owners who reside in nursing homes or assisted living facilities to retain their principal residence exemption. The owner must satisfy the following four conditions: (1) the owner must continue to own the property while residing in the nursing home or assisted living facility; (2) the owner has not established a new principal residence; (3) the owner maintains the property while in the nursing home or assisted living facility; and (4) the property is not occupied, for sale, leased or used for any business or commercial purpose.

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