A growing problem for homeowners in a marketplace pocked marked with foreclosures in every neighborhood has been the limitation of filing for the Michigan Principle Residence Exemption (AKA Homestead Exemption Credit) to one time a year, on May 1st. Expansion of the Michigan Principle Residence Exemption filing deadlines is in the works, and hopefully will become reality.
There is currently legislation in the works that involves expansion of the Michigan Principle Residence Exemption filing deadlines to two times a year, once on May 1st and an additional date on October 1st. Under current law, Michigan homeowners may only file currently on May 1st for a principle residence exemption.
Recently Senate Bill 77, sponsored by Senator Jud Gilbert (R-Algonac, Michigan) was unanimously passed by the Senate 36-0. It now moves onto the House of Representatives for review and consideration. I as a Realtor in Michigan am hopeful that the House will pass this swiftly without delay.
The problems that the current limitations present on the filing for the Michigan principle residence exemption are many.
Foreclosures, because they are unoccupied, lose their principle residence exemption if the house was vacant before May 1st. A homebuyer for example who buys a foreclosure in June must then wait until the following May to be able to take advantage of the Homestead exemption credit.
This adds an additional 18 mils that they must pay in taxes for a non-homestead rate, even though it is their principle residence. This can sometimes push the escrow payments too high, and require that they not make their purchase because of the higher house payment. Some manage to afford it and go through the 11 month period, and say nothing.
From an outsiders perspective, it could be looked as that Michigan is punishing people that move here and take up their principle residence. This new proposed legislation makes sense, and at least adds an additional filing month of October. Hopefully this will make Michigan a more appealing State to take up residence, at least from that perspective.
As a Realtor, I would like the see the State take it even further, and allow for filing each quarter, to stimulate home buying year round. However, this new Senate Bill 77 is a good start. As this is a taxpayer friendly legislation, it will be interesting to see what the House does with it with only 9 days remaining in their current session.
The bill also allows for a special provision for 2010, allowing residents to file on November 1st this year only if it is passed. Expansion of the Michigan Principle Residence Exemption filing deadlines need to occur to make it easier for homeowners. It will also help reduce the level of vacant homes across the State.
Opponents of this legislation may argue that it is a loss of income for the State, however, in the long run; a State populated with vacant homes is more akin to a cemetery than a neighborhood filled with constituents who vote. I hope the bill passes.
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