Michigan Land Owners Will Get Property Tax Relief in 2015

Michigan House Bill 5552, signed into law by Governor Rick Snyder, will add much needed exemptions to Michigan’s property tax uncapping law effective for transfers occurring after December 31, 2014.

If you are a Michigan land owner, you know that the annual increase of a property’s taxable value is “capped,” which means that although the fair market value of a parcel of land may increase substantially from year-to-year, its taxable value will increase much less so. However, a property’s value is “uncapped” when the land is sold or transferred. When a “transfer of ownership” of land occurs, the local assessor may reassess the property’s taxable value to equal the property’s then fair market value. In hot markets, or when real estate values increase over many years of ownership, this can result in a substantial increase in the property taxes a new owner would have to pay following the transfer.

In many cases, the increased property taxes are substantial, especially if the property was held by the same owner for many years. If an owner of real estate died and the property was inherited by the owner’s children, they oftentimes did not have the ability to pay the newly increased property taxes and, therefore, would be forced to sell. Whether it was the family home, hunting property, or a family cottage on Lake Michigan, family members who stood to inherit real estate from a deceased relative got no relief under the law.

Under the newly enacted amendment, the uncapping exemptions are extended to situations where the property is inherited by close relatives after the owner dies, whether by will, trust, or intestate succession (where the owner did not have a will).  After December 31, property taxes won’t necessarily increase merely because a land owner dies.  This amendment will improve estate planning flexibility for property owners and will ease the property tax burdens of surviving family members. This is a big win for Michigan land owners.

The new law goes into effect on October 22, 2014.  You can read the enrolled bill here.