Dual Principal Residence Exemptions are Possible

Meeting certain criteria
There is a little known exception to the rule that a homeowner can claim a Principal Residence Exemption on only one residence at a time. In response to the sluggish real estate market, Michigan enacted a law in 2008 allowing a homeowner who has acquired a new residence to claim a Principal Residence Exemption (PRE) on both the new residence and the homeowner’s prior residence if certain criteria are met.

How to take advantage of the dual exemptions
The homeowner must file a Conditional Rescission of Principal Residence Exemption Form with the local assessor. The Conditional Rescission allows the homeowner to claim dual principal residence exemptions for up to three tax years if the previous residence (1) is not occupied, (2) is for sale, (3) is not leased out, and (4) is not used for any business or commercial purposes.

When you must file
If you happen to move out of your home and rescind your principal residence exemption at that time in order to claim it on your new residence, you can reverse the rescission by later filing the Conditional Rescission Form if it appears that your old home will remain on the market for a while. Just remember that the form must be filed by May 1 in order to be effective for the current year. Also remember that the conditional rescission must be
renewed annually. If you have a conditional rescission that is effective for 2011, you must file again by December 31, 2011, in order to claim the exemption for 2012.

There are several other restrictions that apply. For example, if you move out of your previous residence and do not purchase a new one, the conditional rescission is not available. It is also not available if you move to another state, or if you lease out your former home even if it later becomes vacant again. If you need assistance in determining whether dual principal residence exemptions may be available to you, please call us.

Categories: Now You Know It

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