Does Michigan Have a Homestead Exemption? How to Claim and Rescind

Michigan does have a homestead exemption, but it goes by a different name: the Principal Residence Exemption, or PRE. If you own and live in a home as your main residence, the PRE removes up to 18 mills of the local school operating tax from your property tax bill, which commonly saves several hundred to a few thousand dollars a year.¹ Michigan also uses the word “homestead” in two other places that trip people up: the Homestead Property Tax Credit on the state income tax return, and the bankruptcy homestead exemption that protects home equity from creditors. All three are covered below, but the PRE is what most homeowners mean when they ask about a homestead exemption.

What the PRE Is Worth

A mill is $1 of tax for every $1,000 of taxable value, and Michigan sets taxable value at roughly 50% of a home’s market value. A house worth $300,000 has a taxable value around $150,000.² The PRE strips up to 18 mills of local school operating tax off that figure. On a $150,000 taxable value, that’s $2,700 a year.

The exemption only touches the school operating piece. County taxes, city taxes, and special assessments still apply. It also doesn’t change your taxable value or affect what happens when the property is later sold.

How to Claim the Exemption

The PRE is not automatic. You file a Principal Residence Exemption Affidavit (Form 2368) with the local tax collecting unit where the property sits. The form states that you own and occupy the property as your principal residence and that you haven’t claimed a similar exemption on another property in Michigan or in any other state.³

There are two filing deadlines each year:

June 1 — covers the summer tax levy and every levy after it.
November 1 — covers the winter tax levy and every levy after it.

Miss both and you lose the exemption for that tax year. Once your affidavit is on file, it carries forward automatically. You don’t refile every year.³

Only one exemption per person. If you own two houses in Michigan, you pick one. Vacation homes, rentals, and second homes don’t qualify.

When You Have to Rescind

When a property stops being your principal residence, you file a Request to Rescind PRE (Form 2602) with the local assessor within 90 days.⁴ That includes moving out, selling, or renting the home to someone else. If the owner dies, the estate’s personal representative files the rescission within 90 days of death. After a divorce, the spouse who no longer owns and occupies the property has to rescind.

The statutory penalty for missing the rescission is $5 per day, capped at $200. The bigger risk is retroactive denial of the PRE claim, which means owing the school operating taxes you were exempted from plus interest.⁴

Filing a false affidavit is treated as a perjury-level offense: up to a year in jail, fines between $1,000 and $5,000, and 500 to 1,500 hours of community service.⁴ Local assessors and the Department of Treasury cross-check exemptions statewide.

Situations That Come Up a Lot

You Bought a New House but Haven’t Sold the Old One

You can claim the PRE on the new home and keep it on the old one for up to three tax years by filing a conditional rescission instead of a full rescission. The old home has to be vacant, listed for sale, not leased, and not used commercially.³ You file the conditional rescission form with the local tax collecting unit within the normal PRE deadlines. If the house doesn’t sell within three tax years, or you start renting it out, the exemption on that property ends.

Active-Duty Military

A service member who previously lived in the home can keep the PRE while on active duty if all four of these are true: they still own the property, they haven’t established a new principal residence somewhere else, the property is being maintained, and it’s not used commercially.³ This covers every branch, including reserve components and the National Guard.

Nursing Home or Assisted Living

An owner who moves to a nursing home, assisted living facility, or another convalescent setting can keep the PRE under essentially the same test as military members: continued ownership, no new principal residence elsewhere, the property is maintained, and (as of the 2018 tax year) it’s not leased or used commercially.⁵ The home no longer has to sit empty. Family or a caretaker can occupy it, as long as there’s no lease and no business use.

The House Is Held in a Trust

A trust itself is not treated as an “owner” for PRE purposes, but the person behind it often is. The grantor of a revocable trust, or of a qualified personal residence trust, is treated as an eligible owner and can claim the PRE.⁶ If the trust is irrevocable and not a qualified personal residence trust, the grantor generally can’t claim the PRE in that role. The sole present beneficiary may still qualify if the trust bought the property as that beneficiary’s principal residence and the beneficiary is totally and permanently disabled.

Moving a home into a revocable trust where you or your spouse is the sole present beneficiary doesn’t trigger a reassessment of taxable value, so putting your house into a living trust won’t cause your taxes to jump.⁷

New Owners: File Fresh, and Watch the Uncapping

Michigan caps yearly increases in taxable value at the lesser of 5% or the inflation rate. When ownership transfers, the cap resets, and the taxable value snaps up to the property’s state equalized valuation (50% of market value). Buy a home the previous owner held for twenty years and your taxable value can be dramatically higher than theirs was, because the cap held their number down the whole time.⁸

The previous owner’s PRE does not carry over. You file your own affidavit by the next June 1 or November 1 deadline.

Some ownership changes don’t count as “transfers” and leave the cap in place:

Transfers between spouses, and from a deceased spouse to the surviving spouse.⁸
Conveying the property to a revocable trust where the settlor or their spouse is the sole present beneficiary.⁷
Deeding the property while keeping a life lease, for the portion covered by that life lease.
Termination of a life lease on residential property after December 31, 2014, if the transferee is the transferor’s (or the spouse’s) parent, sibling, child, adopted child, or grandchild and the property isn’t used commercially.⁷
A bank or land contract seller taking property back through foreclosure.

If you’re inheriting a home or receiving one through a family transaction, confirm the specific transfer qualifies before assuming the cap survives. Getting it wrong is expensive.

The Homestead Property Tax Credit Is a Different Program

The Homestead Property Tax Credit is not the PRE. It’s a refundable credit claimed on your Michigan income tax return using Form MI-1040CR, and it’s based on the ratio of your property taxes to your household income.⁹ Both programs can apply in the same year.

The main features:

Homeowners and renters both qualify. Renters treat 23% of gross rent as property taxes.
Homeowners are not eligible if the property’s taxable value exceeds $135,000, a threshold that’s adjusted annually for inflation beginning with the 2021 tax year.⁹
The base maximum credit is $1,500 a year, also inflation-adjusted from the 2021 tax year on.
The credit is refundable, so if it exceeds your Michigan tax liability, the difference comes back to you.

Homeowners 65 and older get an enhanced calculation: a credit of up to 100% of the amount their property taxes exceed 3.5% of household income, subject to the maximum.¹⁰

Poverty Exemption for Low-Income Homeowners

Under MCL 211.7u, the local board of review can grant a partial or full property tax exemption to homeowners who can’t afford their taxes due to poverty. Applicants must meet federal poverty guidelines, or alternative local guidelines that are at least as generous.¹¹

The poverty exemption is applied for every year. You must own and occupy the property as your principal residence, file with the board of review, and provide federal and state tax returns for everyone in the household. Decisions are made case by case, so outcomes vary by municipality. It stacks with the PRE and can effectively wipe out a qualifying homeowner’s property tax bill.

Bankruptcy Homestead Protection Is a Separate Thing

Michigan’s bankruptcy homestead exemption uses the same word but does something completely different. It protects a slice of your home equity from creditors in bankruptcy. Michigan debtors can choose between the state and federal exemption systems.¹²

Under the Michigan state exemption, you can protect up to $30,000 of equity in your homestead, or $45,000 if the debtor or a dependent is 65 or older or disabled at the time of filing.¹² Under the federal exemption in 11 U.S.C. § 522, the homestead figure is $31,575 per debtor.¹³ Married joint filers can each claim the exemption. Which system works out better depends on the rest of your assets and the other exemptions available in each.

If Your PRE Is Denied

Denials and revocations can be challenged at the Michigan Tax Tribunal. Residential property owners generally must first protest before the local Board of Review; PRE denials issued by the Department of Treasury can go straight to the Tribunal without that step.¹⁴

The Tribunal reviews the evidence fresh, and the homeowner carries the burden of showing eligibility.¹⁴ For residential property, the filing deadline is generally July 31 of the tax year at issue. Bring the affidavit you filed, plus utility bills, voter registration, driver’s license, and anything else that establishes the property as your principal residence. A win can mean reinstatement of the exemption and a refund of overpaid taxes; a loss can mean additional tax owed plus interest. Self-representation is allowed, but the filings and evidentiary standards are formal enough that a property tax attorney is worth considering when meaningful money is on the line.

1
State of Michigan. Principal Residence Exemption
2
Michigan Legislature. Michigan Compiled Laws Section 205.737 – Tax Tribunal Act (Excerpt)
3
Michigan Legislature. Michigan Compiled Laws Section 211.7cc – The General Property Tax Act (Excerpt)
4
State of Michigan. Claim Requirement
5
State of Michigan. Principal Residence Exemption Guidelines
6
State of Michigan. Ownership Requirement
7
State of Michigan. Transfer of Ownership Guidelines
8
Michigan Legislature. Michigan Compiled Laws Section 211.27a – The General Property Tax Act (Excerpt)
9
Michigan Legislature. Michigan Compiled Laws Section 206.520 – Income Tax Act (Excerpt)
10
Michigan Legislature. Services for Seniors
11
Michigan Legislature. Michigan Compiled Laws Section 211.7u – The General Property Tax Act (Excerpt)
12
Michigan Legislature. Michigan Compiled Laws Section 600.5451
13
Office of the Law Revision Counsel. 11 USC 522 – Exemptions
14
Michigan Legislature. Tax Tribunal Act (Excerpt)