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Michigan Real Estate Law: Should I Appeal My Property Tax Assessment?

Real Estate Tax Law

Time is of the Essence:

Now is the time to decide whether to appeal your current residential or industrial/commercial property tax assessment. When you receive your assessment notice for your home or business, should you discuss it with a real estate attorney?

If you own industrial/commercial property, the deadline for filing an appeal with the Michigan Tax Tribunal is during the summer. However, if you own residential property, your first step is the local taxing authority’s board of review held annually in March. In addition, appeal assessments in Grand Rapids or Detroit require you to participate in an assessor’s review prior to appealing to your local board of review. It is important to plan ahead to avoid running afoul of these time limits.

Is My Assessment Worth Appealing?

For state tax purposes, your property’s assessed value is 50% of your property’s fair market value as of December 31st. The local tax authority then calculates the property’s taxable value by multiplying the last year’s taxable value by 5% or the Consumer Price Index (CPI), whichever is less. Your property’s taxable value is always equal to, or less, than your property’s assessed value. Therefore, your assessment may be worth appealing when you believe your property’s taxable value is more than half of your property’s fair market value. If you do decide to meet with a real estate attorney to discuss an appeal, you should compile:

1) a property description (including square footage, the current use, and amenities)

2) the new property assessment

3) past property assessments

4) any documents indicating the current fair market value of the property (such as appraisals, insurance policies, or a list of similar recently sold properties in your immediate area)

The Danger of “Uncapping” the Property’s Taxable Value:

If you are considering whether to buy, sell, or transfer an ownership interest in real estate you should speak with a real estate attorney on how to transfer the property and still keep the tax benefits under Proposal A. Under Proposal A, your property’s taxable value growth is “capped” at 5% or the Consumer Price Index (CPI), whichever is less if there is no transfer of ownership during the tax year. However, when a piece of property is sold or the ownership interest is transferred, the property’s taxable value becomes the assessed value in the next taxable year. Therefore, Proposal A “caps” real property taxes from increasing rapidly as long as there is no transfer of ownership during the tax year.

Under Michigan law, a transfer of ownership is “the conveyance of title to or a present interest in property, including the beneficial use of property, the value of which is substantially equal to the value of the fee interest.” MCL 211.27a(6). There are several exclusions from the definition of transfer of ownership under Michigan law that you may be able to take advantage of. For instance, it may be worthwhile to speak with a real estate attorney for real estate transfers involving:

– husbands and wives

– life estates or life leases

– foreclosure or a deed in lieu of foreclosure

– trusts and trustees

– divorce proceedings

– real estate with multiple owners

– parent-child corporations

– agricultural property

– forest property

– conservation easements

In addition, the Michigan Legislature has recently amended Michigan Real Estate Law to extend tax benefits to owners of residential homes. Beginning December 31, 2013, transfers of residential real property between family members may get preferential tax treatment. Therefore, it may also be worthwhile to contact a real estate attorney when transferring real property within your family. As always, you can contact Shinners & Cook at 989.799.5000 with any questions regarding your property taxes or any other legal questions.

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