When an individual transfers real estate in the state of Michigan a real estate transfer tax fee is charged, which is percentage of the sales price. This fee is assessed both by the state and the county in which the property was sold. This fee is the seller's responsibility, unless otherwise agreed upon, and is reported on the "Real Estate Transfer Valuation."
Pursuant to a recent decision by the Michigan Supreme Court in July of 2015, individuals may be eligible for a refund of real estate transfer taxes they have paid within the last four years. In addition, going forward sellers may be exempt from incurring this tax when they transfer property. The following requirements must be met to qualify for exemption or refund:
- The property must have been classified as a homestead property and occupied as your principal residence
- The property's State Equalized Value (SEV) for the year in which you transfer the property must be less than or equal to the State Equalized Value for the year in which the property was acquired by the seller
- The property cannot be transferred for consideration other than its "true cash value", which has been redefined under the amendment as fair market value agreed upon by both seller and purchaser
The application for the real estate transfer tax refund is filed on form 2796 and requires the following attachments:
- Proof of State Real Estate Transfer Tax paid to Register of Deeds (copy of RECORDED DEED containing real estate transfer tax stamp or official receipt from country treasurer and form L-4258, Real Estate Transfer Tax Valuation Affidavit)
- Proof of date of purchase and SEV in year of purchase
- Proof of date of sale and SEV in year of sale
- Proof of sales price of property
Therefore if you have sold your primary residence in the last four years you should review the SEV at the time of sale versus the SEV at the time of purchase to determine if you are eligible for a refund of the transfer tax paid.
For more information or questions on this topic, please contact your local UHY LLP professional.