Property Taxes - Notice of Assessments

Helpful info for all Michigan property owners! Within the next 1-2 weeks you should receive in the mail (if you haven’t already) your “2023 Notice of Assessment” which has your 2023 property tax information on it. We always get a lot of questions on these notices so hopefully these graphics are helpful! It's especially important to be properly assessed the first year after a property/home purchase, after the first year your taxable value is locked in and can only increase each year by the rate of inflation or 5%, whichever is less.

Michigan Court of Appeals Decision: Renting Your Primary Home

Michigan Court of Appeals Decision: Renting Your Primary Home

Can I rent out my primary home as a short term rental and still retain my principal residence exemption (PRE)?

In late 2017 there was a ruling by the Michigan Court of Appeals that could potentially impact many short term vacation property rental owners in Leelanau County. The petitioner was the owner of a vacation property in Boyne City who was denied their Principal Residence Exemption (PRE) by the Michigan Tax Tribunal because they rented out their primary home for more than 14 days during each year. The petitioner provided proof that he occupied the house for the majority of the year as the primary residence, was registered to vote at the address, and it was the address listed on his driver’s license and tax returns. He also stated that he had not claimed a principal residence in another state.  

In the appeal, RENTSCHLER v. TOWNSHIP OF MELROSE the Michigan Court of Appeals decision was the following:

“…For all these reasons, we conclude that the PRE guideline provision relied on by the Tribunal is erroneous and inconsistent with the GPTA. Renting one's home for more than 14 days does not disqualify a homeowner from the PRE. Accordingly, accepting the Tribunal's factual findings, we conclude that defendant has satisfied the legal requirements to qualify for the PRE. We therefore reverse the Tribunal's decision and remand for entry of a judgement granting petitioner's request for PRE for the 2013, 2014, and 2015 tax years. We do not retain jurisdiction.”

The Michigan Court of Appeals decision did not specify how many rental days is too many to qualify for the Principal Residence Exemption so it is likely there will be additional controversy and/or court cases dealing with this issue.

Here are a few helpful links dealing with this topic:

 http://caselaw.findlaw.com/mi-court-of-appeals/1881127.html

http://publicdocs.courts.mi.gov:81/OPINIONS/FINAL/COA/20171128_C336333_21_336333.OPN.PDF

http://www.fraserlawfirm.com/blog/2017/12/michigans-principal-residence-exemption-and-short-term-rentals/

https://www.wnj.com/Blogs/Appellate/December-2017/COA-A-Petitioner-is-entitled-to-a-Principal-Resid

Disclaimer: I am not an attorney. I recommend that you contact an experienced real estate attorney for further explanation on this Michigan Court of Appeals ruling and how it could potentially impact your real estate.

Jonathan Oltersdorf, Oltersdorf Realty, LLC
Phone: 231-271-7777
E-mail: jonathan@oltersdorf.com

Pure Michigan & Google 360 Tours!

Pure Michigan & Google 360 Tours!

The State of Michigan and Google have reached an agreement for Google Trekker to provide full 360 degree “virtual tours” of popular attractions such as the Sleeping Bear Dunes Dune Climb and other trail hikes in our region and throughout the State of Michigan. Click below for some popular tourist destinations in Leelanau County.

Sleeping Bear Dunes Pierce Stocking Overlook

Sleeping Bear Dunes Dune Climb

Sleeping Bear Dunes Pyramid Point Trail

Sleeping Bear Dunes Empire Bluff Trail

Click here for all of the locations in Michigan

Leelanau Named Michigan's Healthiest County 2013

Leelanau County Named Michigan's Healthiest County

Leelanau County was just named the healthiest County in Michigan based on health outcomes that include length of life, quality of life, and various health factors. The report was released by the Robert Wood Johnson Foundation and the University of Wisconsin. Grand Traverse County (Traverse City) is ranked #7.

The full criteria and additional information can be found on http://www.countyhealthrankings.org/

The Michigan section is located here: http://www.countyhealthrankings.org/app/michigan/2013/rankings/outcomes/overall/by-rank

Michigan House Bill 4753 Passed - Prevents Property Tax Increase on Family Real Estate Transfers

Michigan House Bill 4753 Becomes Law

Public Act 497 of 2012
Prevents Tax Increase on Family Real Estate Transfers

House Bill 4753 sponsored by Rep. Peter Pattalia is a bill that became law on December 28, 2012. The law will affect the transfer of real estate between family members beginning on December 31, 2013. Previously in Michigan when residential real property is transferred to a new owner (including family members), the taxable value generally “uncaps” to the true market value of the property. Once you own residential real estate the taxable value cannot increase from one year to the next by more than 5% or the rate of inflation, whichever is less, until that real estate is transferred to a new owner. This recently passed law will significantly impact many families in Leelanau County and Grand Traverse County (Traverse City), especially those families who have had the same property for 20+ years. Previously, if you planned on leaving residential real estate to a family member, the property tax “uncap” might not allow them to afford the new “market value” property tax, resulting in them being forced to immediately sell the family home.

Here is the exact language in the bill (page 4 of 5):

(s) Beginning December 31, 2013, a transfer of residential real property if the transferee is related to the transferor by blood or affinity to the first degree and the use of the residential real property does not change following the transfer. As used in this subdivision, “residential real property” means real property classified as residential real property under section 34c.

(e) Residential real property includes the following:
(i) Platted or unplatted parcels, with or without buildings, and condominium apartments located within or outside a village or city, which are used for, or probably will be used for, residential purposes.
(ii) Parcels that are used for, or probably will be used for, recreational purposes, such as lake lots and hunting lands, located in an area used predominantly for recreational purposes.

The one concern that I am sure will be a hot topic is that this law doesn’t discuss the role of trusts in the transfer of real estate. It does however for the first time allow for the transfer of residential real property to children and step-children without the “uncapping” of property taxes.

Here is a fictional example of could happen starting December 31, 2013:

Suttons Bay waterfront vacation home that has been in the same family since 1972

Current Taxable Value = $200,000 (paying tax on a $400,000 true cash value)
Current Assessed Value = $300,000 ($600,000 true cash value)

-The current owners in this scenario pay non-homestead tax of = ~$7,820 per year.
-Property Transfers under old system “uncaps” the non-homestead tax to = ~$11,730 per year.

Under the new law (Michigan House Bill 4753) the family member(s) will save about $3,550 per year!

Many of waterfront homes on West Grand Traverse Bay, Suttons Bay, Lake Leelanau, Glen Lake, and Lake Michigan could see a $10,000-$20,000 per year difference especially if it is a large “estate” size waterfront parcel that has been in the same family for a long time!

For Full Documents Click Here:   Bill As Passed By The House

                                                  House Introduced Bill

                                                  Final Public Act (the above bill that has become law)

                                                  Michigan Legislature Page: House Bill 4753

Jonathan Oltersdorf, Oltersdorf Realty, LLC
Phone: 231-271-7777
E-mail: jonathan@oltersdorf.com

Michigan House Bill 4753 – Goal is to Prevent Tax Increase on Family Real Estate Transfers

Michigan House Bill 4753 Intends to Prevent Tax Increase on Family Real Estate Transfers

This topic has been updated in a newer post. Please CLICK HERE.

House Bill 4753 sponsored by Rep. Peter Pattalia has passed the Michigan house and has a decent chance of becoming law by the end of the year. As written, the bill would affect transfer of real estate between family members beginning on December 31, 2013. Currently in Michigan when a piece of real estate is transferred to a new owner (including family members), the taxable value generally “uncaps” to the true value of the property. Once you own a piece of real estate the taxable value cannot increase from one year to the next by more than 5% or the rate of inflation, whichever is less, until that real estate is transferred to a new owner. This piece of Legislation would significantly impact many families in the Leelanau County and Grand Traverse County area, especially those families who have had the same piece of real estate for 20+ years. Previously, if you planned on leaving real estate to a family member, the property tax “uncap” might not allow them to afford the new property tax, resulting in them being forced to sell that home/condo/acreage. Conversely, if the bill does pass, the negative impact will be on local governments and school districts which use property tax dollars to help fund their budget, especially in areas with a large amount of family waterfront cottages such as Leelanau County and Traverse City.     

Here is a fictional example:

Suttons Bay waterfront vacation home that has been in the same family since 1972

Current Taxable Value = $125,000 (paying tax on a $250,000 true cash value)
Current Assessed Value = $200,000 ($400,000 true cash value)

-The current owners in this scenario pay non-homestead tax of = ~$4,869 per year.
-Property Transfers under old system “uncaps” the non-homestead tax to = ~$7,791 per year.

Under the MI Bill 4753 the new family member(s) would save almost $3,000 per year!

Keep in mind that a $400,000 waterfront house is the low of the market for many waterfront homes on West Grand Traverse Bay, Suttons Bay, Lake Leelanau, Glen Lake, and Lake Michigan. In some scenarios you could see a $10,000-$20,000 per year difference. Oltersdorf Realty, LLC will be keeping a close eye on this bill.

For Full Documents Click Here:   Bill As Passed By The House
                                                  House Introduced Bill
                                                  Michigan Legislature Page: House Bill 4753

Jonathan Oltersdorf, Oltersdorf Realty, LLC
Phone: 231-271-7777
E-mail: jonathan@oltersdorf.com

Update on 2013-01-14 22:15 by Oltersdorf Realty, LLC

Michigan House Bill 4753 has been passed into law. I have an updated blog post on this topic that can be found here: /blog/2013/1/14/michigan-house-bill-4753-passed-prevents-property-tax-increa.html

Health Care Reform

Health Care Reform
Top 10 Things You Need to Know About the 3.8% Real Estate Tax

1. When you add up all of your income from every possible source, and that total is less than $200,000 ($250,000 on a joint tax return), you will not be subject to this tax.
2. The 3.8% tax will never be collected as a transfer tax on real estate of any type, so you’ll never pay this tax at the time that you purchase a home or other investment property.
3. You’ll never pay this tax at settlement when you sell your home or investment property. Any capital gain you realize at settlement is just one component of that year’s gross income.
4. If you sell your principal residence, you will still receive the full benefit of the $250,000 (single tax return)/$500,000 (married filing joint tax return) exclusion on the sale of that home. If your capital gain is greater than these amounts, then you will include any gain above these amounts as income on your Form 1040 tax return. Even then, if your total income (including this taxable portion of gain on your residence) is less than the $200,000/$250,000 amounts, you will not pay this tax. If your total income is more than these amounts, a formula will protect some portion of your investment.
5. The tax applies to other types of investment income, not just real estate. If your income is more than the $200,000/$250,000 amount, then the tax formula will be applied to capital gains, interest income, dividend income and net rents (i.e., rents after expenses).
6. The tax goes into effect in 2013. If you have investment income in 2013, you won’t pay the 3.8% tax until you file your 2013 Form 1040 tax return in 2014. The 3.8% tax for any later year will be paid in the following calendar year when the tax returns are filed.
7. In any particular year, if you have no income from capital gains, rents, interest or dividends, you’ll never pay this tax, even if you have millions of dollars of other types of income.
8. The formula that determines the amount of 3.8% tax due will always protect $200,000 ($250,000 on a joint return) of your income from any burden of the 3.8% tax. For example, if you are single and have a total of $201,000 income, the 3.8% tax would never be imposed on more than $1,000.
9. It’s true that investment income from rents on an investment property could be subject to the 3.8% tax. But: The only rental income that would be included in your gross income and therefore possibly subject to the tax is net rental income: gross rents minus expenses like depreciation, interest, property tax, maintenance and utilities.
10. The tax was enacted along with the health care legislation in 2010. It was added to the package just hours before the final vote and without review. The National Association of Realtors strongly opposed the tax at the time, and remains hopeful that it will not go into effect. The tax will no doubt be debated during the upcoming tax reform debates in 2013.

You can download a comprehensive 10 page brochure here: http://www.ksefocus.com/billdatabase/clientfiles/172/8/1437.pdf

Source:http://www.realtor.org/topics/health-care-reform/top-10-things-you-need-to-know-about-the-38-tax
Copyright National Association of REALTORS®. Reprinted with permission.

Michigan Beach Grooming Legislation -SB 1052

Michigan Beach Grooming Legislation

SB 1052 has been passed by the Michigan Senate and the Michigan House and is currently on its way to Governor Rick Snyder for approval.

Lakefront vegetation has become more of an issue in recent years in Leelanau County and Grand Traverse County as water levels have receded exposing more shoreline and lake bottom allowing plants to grow. Previously a permit was required to remove vegetation. The new bill allows property owners on Lake Michigan (West Grand Traverse Bay & East Grand traverse Bay) to remove vegetation without a state permit.

The latest version of the legislation specifically says that the state or a local government may not regulate

• Leveling sand, removing vegetation, grooming soil, or removing debris, in an area of unconsolidated material predominantly composed of sand, rock, or pebbles, located between the ordinary high-water mark and the water's edge, or the
• Mowing vegetation between the ordinary high-water mark and the water's edge.

To read the full 27 page bill as passed by the house and senate on June 14, 2012 please click the following link: http://www.legislature.mi.gov/documents/2011-2012/billconcurred/Senate/pdf/2012-SCB-1052.pdf

Lake Michigan Water Levels - April 2012

Current Lake Michigan Water Levels

The United States Army Corps of Engineers collects and publishes current / past Lake Michigan water level data which is important to many property owners in Leelanau County and on Old Mission Peninsula. Their last reading took place yesterday on April 1, 2012.

April 1, 2012                   577.54 feet

Historic Water Levels
Avg Last Month                  577.42 feet
Avg Last Year                     577.14 feet
Minimum                           576.10 feet (1964)
Maximum                          581.50 feet (1986)
Long Term Avg                  578.70 feet

Click here to open/download the full report:
http://www.lre.usace.army.mil/hh/GreatLakesWaterLevels/GLWL-CurrentMonth-Feet.pdf

For more information on current & past historic records regarding the Great Lakes Water Levels please visit:
http://www.lre.usace.army.mil/greatlakes/hh/greatlakeswaterlevels/currentconditions/

Principal Residence Exemption Changes - Senate Bill 349

Principal Residence Exemption Legislation Unanimously Passes Senate

Today, the Michigan Senate voted 38-0 in support of legislation providing a fair process when it comes to their property taxes.

Senate Bill 349, sponsored by Senator Dave Hildenbrand (R-Lowell) creates two Principal Residence Exemption (PRE) filing dates; one on June 1st, and the other on November 1st. Additionally, this legislation allows bank-owned properties to retain their PRE so that buyers can qualify at the lower rate of taxation. This is particularly important since foreclosures have flooded the market in recent years.

Senate Bill 349 now heads over to the House for consideration.

Copyright Michigan Association of REALTORS®. Reprinted with permission.

IF THIS BECOMES LAW WHAT DOES IT MEAN?

Currently, Michigan property owners have to file a principal residence exemption form by May 1 to get lower primary home taxes for the full year. If you miss the May 1 deadline or you purchase a house that wasn't a primary home after May 1 you will pay the higher non homestead taxes until the following year. If this bill becomes law the new deadline for your summer tax bill (the much higher bill) will be June 1 and November 1 for the winter tax bill. In short, it will save the home purchaser money if you buy a non-homestead (vacant or non primary residence) home after May 1 and intend to occupy the home as your primary residence.

Exemptions for bank owned properties.

This also appears to be a major tax break for lending institutions and banks that can file an exemption to receive the homestead property tax rate (primary home rate) for vacant assets that are currently for sale. This also could allow for purchasers to qualify for their mortgage based on the lower tax rate and qualify for a slightly more expensive home.

Here is the most relavent portion of the bill:

An owner of property may claim 1 exemption under this section by filing an affidavit on or before May 1 FOR TAXES LEVIED BEFORE JANUARY 1,2012 OR, FOR TAXES LEVIED AFTER DECEMBER 31, 2011, ON OR BEFORE JUNE 1 FOR THE IMMEDIATELY SUCCEEDING SUMMER TAX LEVY AND ALL SUBSEQUENT TAX LEVIES OR ON OR BEFORE NOVEMBER 1 FOR THE IMMEDIATELY SUCCEEDING WINTER TAX LEVY AND ALL SUBSEQUENT TAX LEVIES

You can read and/or download the full 27 page Senate Bill 349 by clicking here:
http://www.legislature.mi.gov/documents/2011-2012/billengrossed/Senate/pdf/2011-SEBS-0349.pdf

UPDATE: APRIL 26, 2012: Yesterday, the Michigan House of Representatives voted 109-1 in support of legislation providing a fair process when it comes to their property taxes. The bill now heads to the Governor, where we expect his signature before May 1st.

UPDATE #2: MAY 1, 2012: PRE Enhancement Legislation Signed by the Governor 5/1/2012 Today, Governor Snyder signed legislation providing homebuyers a fair process when it comes to their property taxes. Senate Bill 349, sponsored by Senator Dave Hildenbrand (R-Lowell) creates two Principal Residence Exemption (PRE) filing dates; one on June 1st, and the other on November 1st. Additionally, this legislation allows bank-owned properties to retain their PRE so that buyers can qualify at the lower rate of taxation. This is particularly important since foreclosures have flooded the market in recent years.

Below are a few FAQ’s regarding the new law:

1. Does the legislation take effect this year?
A. Yes. The new law moves current May 1st PRE filing deadline to June 1st of this year.

2. How does it work?
A. If a homebuyer purchases a Principal Residence and closes on or before June 1st, they can take advantage of a significant tax break by filing for a Principal Residence Exemption.

3. When is the additional filing date?
A. November 1st. This allows for tax relief in those communities that still collect a portion, if not all of their non-homestead mills, on the December tax bill.

4. If my client buys after June 1st this year, what can they expect?
A. If a homebuyer purchases a home after the June 1st filing deadline, and their local tax authority collects all non-homestead mills on the spring tax bill, their property taxes may not reflect the exemption until the next tax bill. If however that local tax authority collects a portion of the non-homestead mills on the winter tax billing cycle, the homebuyer can file for a PRE before the November 1st and exempt themselves from any non-homestead mills collected on the December bill.

5. What about the foreclosure provisions?
A. Banks have the option of maintaining the home’s Principal Residence status by filing a Conditional Rescission. By maintaining this exemption status, it’s the expectation that borrowers will be able to qualify for financing on these foreclosed properties at the PRE rate and begin paying the lower rate of taxation as soon as they move into the home. To make up for the lost school revenue, banks will be assessed a newly defined tax that will keep the 18 mills (which they presently pay on any foreclosed property) when a property can no longer qualify as a principle residence. It is important for those REALTORS® working with bank clients to let lenders know about the change and communicate the benefit of filing a Conditional Rescission.

Copyright Michigan Association of REALTORS®. Reprinted with permission.

If you are planning on buying a home in Leelanau County or Traverse City/Grand Traverse County you should continue to follow this bill as it could potentially become law in the near future.

Jonathan Oltersdorf
Vicky Oltersdorf
Oltersdorf Realty, LLC
Phone: 231-271-7777
E-Mail: realestate@oltersdorf.com