Michigan Primary Residence Rental Taxes

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Michigan Primary Residence Rental Taxes

Louis SchmidtPro Member
Investor · TX · Member since 2014 · 8 posts · 0 votes

Hello!

I currently live in Michigan and am looking at moving out of state. I would like to keep my current residence and rent it out. Is anyone familiar with how the taxes work on that? Obviously my taxes are homesteaded right now, but would they become non-homestead if I move and keep it as a rental? My understanding in Michigan is that the taxes are "uncapped" when there is a change in ownership (title, deed) and then capped again at close of sale. Basically, I am trying to find out if my taxes will increase to non-homestead if I move out and make my primary home a rental or if they will stay as homestead since nothing actually changes. As anyone in Michigan knows, this is a drastic swing in cash flow. Thank you for any advice.

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Eric WilkinsonPro Member
Chelsea, MI · Member since 2019 · 50 posts · 52 votes
5y

You should contact your local assessor for specifics, but I think that the homestead exemption would change to 0%.  The taxable value of the property would stay the same and not reset since you are not changing ownership.  Your taxes would go up since you might be paying about 16 mils more in taxes since it is nonexempt, but the value the mils are multiplied against should not change.  Check out the treaurer’s page for an estimate.  https://treas-secure.state.mi....

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  • Eric WilkinsonPro Member
    Chelsea, MI · Member since 2019 · 50 posts · 52 votes
    5y

    You should contact your local assessor for specifics, but I think that the homestead exemption would change to 0%.  The taxable value of the property would stay the same and not reset since you are not changing ownership.  Your taxes would go up since you might be paying about 16 mils more in taxes since it is nonexempt, but the value the mils are multiplied against should not change.  Check out the treaurer’s page for an estimate.  https://treas-secure.state.mi....

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    5y

    @Louis Schmidt taxable value will NOT change, but you'll pay nonhomestead milage rate.

    Tip: wait until after May 15 to file paperwork rescinding your homestead exemption because that's usually when most assessor offices change their tax calculations.

    [email protected]248-209-6824
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  • Louis SchmidtPro Member
    OP
    Investor · TX · Member since 2014 · 8 posts · 0 votes
    5y

    Thank you both, this is extremely helpful.

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  • Courtney M.
    Lake Elsinore, CA · Member since 2018 · 235 posts · 300 votes
    5y

    @Louis Schmidt - this is a helpful calculator I found for determining non-homestead taxes.

    https://www.michigan.gov/taxes...

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  • Jason Shackleton
    Investor · Ontario · Member since 2015 · 486 posts · 250 votes
    5y

    I am considering the same move. What I have found out is that selling my primary residense as a primary residense now is my best bet at avoiding a large tax bill. Followed by getting an appraisal of the homes value on my move out date, when it becomes a rental. In the case of a future sale, the years I lived in the property will be taxed exempt and the years I had it as a rental will be taxed accordingly. I am an Ontario investor but I believe this logic is true or a variation of it in all markets. Good luck.

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    5y

    @Jason Shackleton I think you're mixing property taxes with capital gains taxes.

    In Michigan, the property taxes will change if you don't list the property as your primary residence - which means you can't rent it out for more than 2 weeks in any tax year.

    If you sell a property you've lived in, you can avoid tax on some of the capital gains if it's been your primary residence 2 out of the last 5 years.

    [email protected]248-209-6824
    Logical Property Management4.9451 Reviews
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  • Scott M.
    Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes
    5y

    Drew is spot on here.

    Taxable value will not be uncapped in this instance.  You simply lose the homestead exemption.  

    If your home is in Birmingham MI the millage rate in 2020 was 41.5466 with the principle exemption and without it it would have been 52.5867.

    So, take your taxable value and multiply it by .0415466 and that will give you roughly what your taxes were in 2020.  Each city adds on some admin fees to that but that will get you in the ballpark.  Then multiply it .0525847 and that is roughly what your taxes would have been if the home wasn't your primary residence.  


    Get in touch if you have more questions on this, happy to look up your address and get you closer to the mark.  

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