Tuesday, May 27, 2008

How to claim Two Homestead Exemptions… if you’re selling your home

In April, the Michigan Legislature passed a law that allows a homeowner to claim an additional Homestead Exemption (for up to three years). Here’s how.

If you buy a home and move into it (making your “new” home your principal residence) and place your old home on the market for sale, you get an extra Homestead Exemption for your old home as long as it remains for sale and is not rented or occupied.

What are the savings? Let’s assume you have an Ann Arbor home with a taxable value of $125,000. Your real estate taxes with the Homestead Exemption would be $5,774 and without the exemption are $7,398. The extra exemption saves you $1,624 per year.

PLANNING NOTE: A special form called the “Conditional Rescission of Principal Residence Exemption”, Form 4640 claiming the extra exemption must be filed with the local real estate taxing authority (in our example, the City of Ann Arbor) by May 1st. This form must be filed each year for a maximum of 3 years.

As always, give us a call if you have any questions.

Bob Weins