Good news for people who own a new home, but are still attempting to sell their old one.
If they act before May 1, they can avoid having the non-homestead property tax rate of up to 18 mills levied on their former residence thanks to a state law enacted April 8.
‘I’m trying to get the word out for anybody that might be in that position,? said Oxford Township Treasurer Joe Ferrari, who wasn’t notified about the new law until April 16.
Under Public Act 96 of 2008, a person who has established a new personal residence can retain the homestead exemption on their previous home for up to three years if the property is not occupied, is for sale, is not leased and is not used for any business or commercial purpose.
‘I’m hoping that those who can apply for it will come in and file the form. Everything’s got to be in by May 1,? said Ferrari, noting the form (#4640) is available at the township office at 300 Dunlap Rd. and on-line at www.michigan.gov/documents/taxes/4640_231633_7.pdf.
The state defines a principal residence as the place where taxpayers keep their most important possessions, house their family, vote, maintain club and lodge memberships, buy automobile licenses, maintain a mailing address and banking location, operate a business or sue for divorce.
Prior to this new law, a person could only have one principal residence within the state that’s eligible for a homestead exemption (now called a principal residence exemption), meaning the homeowner is not required to pay the local school operating millage.
School districts are allowed by law to levy up to 18 mills ($18 for every $1,000 of a property’s taxable value) for operating purposes on all non-homestead properties such as second homes, vacation homes, rental properties, businesses or other commercial properties.
Oxford Area Community Schools currently levies 17.9946 mills on such properties whereas the Orion school district (which includes portions of Oxford and Addison townships) levies the full 18 mills.
Unfortunately, this hefty tax burden hurts people who own a new home ? for which they now claim a principal residence exemption ? but are still trying to sell their previous home, which becomes subject to the non-homestead millage rate when the previous exemption expires Dec. 31 of the year they moved out.
Under the old law, a person was required to rescind their homestead exemption within 90 days of the date they no longer own or occupy (whichever comes first) the property as their principal residence.
The new law lets people keep the homestead exemption on their old property for up to three years, provided they meet certain criteria and file the necessary forms annually.
The opportunity to apply and qualify for this conditional extension of the homestead exemption begins with the 2008 tax year and is not retroactive to previous tax years.
Ferrari sees this new law as a way to help ‘level the playing field a little bit? for people whose old homes have been up for sale for a year or longer and are now at a ‘competitive disadvantage? because of the non-homestead tax rate.
‘For those folks who have been unable to sell their old home, this allows them to compete with those folks that still have their homesteads,? he said.
If a home has the homestead exemption in place when it’s purchased, the new owner doesn’t have to pay any non-homestead taxes.
But if a home is subject to the non-homestead rate when it’s purchased and the new owner moves in after May 1, then he or she has to pay up to 18 mills until a homestead exemption can be filed for the following year.
‘You inherit whatever the old homeowner had,? Ferrari explained.
To some potential buyers, having to pay up to 18 mills on a new home during the first year of ownership could be a ‘deal-breaker,? especially if there’s a similar home for sale in the area that still has its homestead exemption in place. ‘If you as a buyer have only a certain amount of money, wouldn’t you want to save that 18 mills and use that maybe for next year’s taxes if you can,? Ferrari said.
Although the treasurer agrees with the spirit and intent of the new law, he’s not pleased it only gives residents until May 1 to apply.
‘That’s a very small window,? Ferrari said. ‘It’s very hard to get the word out in such a short amount of time.?
The treasurer’s particularly concerned about people who have moved out of state, but still have homes for sale here and have ‘no idea? about this new law.
‘We don’t know where they’re at to let them know about this,? Ferrari said. ‘If you’re in South Carolina and you’ve still got your home in Oxford you’re trying to sell, you don’t know that you can still keep the homestead (exemption) with this new legislation.?
He said many of those folks probably won’t find out until months after the May 1 deadline and ‘by that time it’s too late.?
Ferrari’s also not pleased that for people who miss the May 1 deadline or move into their new house after that date ‘there’s no remedy? because local Boards of Review were given no authority to help.
‘I wish, in the legislation, they would have allowed the boards of review to hear it,? he said. ‘Then you could have July or December as a chance to make up for those folks.?