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