Skip to main content
Disqualifying Factors

Disqualifying Factors

Overview

This section explores factors that disqualify a person for a principal residence exemption under MCL 211.7cc. It examines statutory definitions, case law interpretations, and practical implications for property owners, assessors, and legal practitioners.

While a person may have owned and occupied a property as a principal residence, the owner will still not qualify for the principal residence exemption in certain circumstances listed in MCL 211.7cc (2) and MCL 211.7cc (3).

Specifically, under MCL 211.7cc (2) and MCL 211.7cc (3), an owner may claim only one principal residence exemption. Married couples who are required to file, or who do file a joint Michigan income tax return, are entitled to not more than 1 exemption.  An owner is ineligible for a principal residence exemption if that person has claimed a substantially similar exemption, deduction, or credit on property in another state, that person or his or her spouse owns property in a state other than this state for which that person or his or her spouse claims an exemption, deduction, or credit substantially similar to the exemption provided under this section, unless that person and his or her spouse file separate income tax returns, or that person has filed a nonresident Michigan income tax returns or returns in another state as a resident (except active duty military personnel stationed in this state with his or her principal residence in this state).

A claim for a similar exemption occurs at the time of the “filing or granting of that exemption” in the other state. (MCL 211.7cc (3)). A “Substantially Similar Exemption” means the Michigan principal residence exemption and the other state’s exemption statute requirements to receive the exemption are substantially similar. (i.e., it must be owned and occupied as a principal residence to receive the exemption).  It does not mean a person receives a substantially similar tax savings. Levenfeld v County of Berrien, unpublished opinion per curiam of the Court of Appeals, issued January 12, 2012 (Docket No. 300358).

Claiming both a Michigan principal residence exemption and a similar exemption in another state may result in a $500 penalty. The penalty shall be distributed in the same manner as interest is distributed under MCL 211.7cc (25).

Assessors, Michigan Department of Treasury, County Treasurer, or the County Equalization Director can request confirmation that a taxpayer didn’t claim a similar exemption in another state. If requested, taxpayers must complete the Principal Residence Exemption Affidavit for Similar Exemptions in Other States (Form 5565) upon request and return it within 30 days, certifying they are not receiving a similar exemption in another state.

Disqualifying Factors Scenarios: Frequently Asked Questions

  1. Chris owns Blue Acre in Houghton Lake, Michigan and Red Acre in Lansing, Michigan. Can Chris claim a principal residence exemption on both properties?
    No. A person is entitled to only one principal residence exemption. Chris can only claim the principal residence exemption on the property that he owns and is occupying as his principal residence.
  2. Is it possible for a person to receive a principal residence exemption on more than one home?
    Yes, but only for a limited period and only in specific instances. An owner can have two principal residences in the year an owner claims a new principal residence exemption and timely rescinds the principal residence exemption on an old property. Additionally, under MCL 211.7cc(5), if an owner established a new principal residence in Michigan, an owner could keep the exemption on a former principal residence for up to three years if it’s unoccupied, for sale, not leased, and not used commercially, by filing timely fling Form Conditional Recission Form (4640).
  3. When may a married couple receive two principal residence exemptions in Michigan?
    A married couple “may” receive two principal residence exemptions in Michigan only if each are owners of the property they claim to be their principal residence; each claims a separate principal residence exemption on the property they allege to be their principal residence; each occupies as their principal residence, the property they allege to be their principal residence; each file separate state and federal tax returns; and none of the other disqualifying factors listed in MCL 211.7cc(3) apply.
  4. When may a married couple receive a principal residence exemption in Michigan and a substantially similar exemption, deduction, or credit, in another state?
    A married couple “may” receive a principal residence exemption in Michigan and a substantially similar exemption in another state only if the spouse claiming the principal residence exemption in Michigan is the owner of the Michigan property; the spouse claiming the principal residence in Michigan occupied the Michigan property as his or her principal residence and not as a seasonal home; the spouse claiming the principal residence exemption in Michigan did not also claim a substantially similar exemption in the other state; separate state and federal tax returns are filed; and none of the other disqualifying factors listed in MCL 211.7cc(3) apply.
  5. Can Assessors, Michigan Department of Treasury, County Treasurer, or the County Equalization Director request confirmation that a taxpayer didn’t claim a similar exemption in another state?
    Yes. Under MCL 211.7cc(3)(a), if requested, taxpayers must complete the Principal Residence Exemption Affidavit for Similar Exemptions in Other States (Form 5565) upon request and return it within 30 days, certifying they are not receiving a similar exemption in another state.
  6. Chris owns and occupies Blue Acre in Michigan as his principal residence and claims a homestead exemption on Red Acre in Florida. Is Chris eligible for the principal exemption in Michigan?
    No. Even though Chris owns and occupies Blue Acre in Michigan, claiming a similar exemption in another state disqualifies him for the Michigan principal residence exemption.
  7. Chris was denied Michigan’s Principal Residence Exemption because he claimed a similar exemption in Florida. If Chris rescinds the Florida exemption and pays back the Florida exemption taxes for the years denied, is he now eligible for the Michigan principal residence exemption for the tax years denied?
    No. Under MCL 211.7cc(3), rescinding a similar exemption in another state does not restore eligibility for the Michigan Principal Residence Exemption for the denied years. Chris is liable for the taxes and interest owed as result of the denial and Chris is subject to a $500 penalty.
  8. Chris owns and occupies Blue Acre in Michigan as his principal residence but files non-resident Michigan tax returns. Is he eligible for the principal residence exemption?
    No. Filing nonresident Michigan tax returns makes Chris ineligible for the principal residence exemption, even though he occupies Blue Acre as his principal residence.
  9. Chris owns and occupies Blue Acre in Michigan as his principal residence but works in California and files California resident tax returns. He intends to return to Michigan. Is he eligible for the principal residence exemption?
    No. Filing California resident tax returns makes Chris ineligible for the principal residence exemption, even though he owns, occupies, and intends to return to Blue Acre.
  10. Chris owns and occupies Blue Acre in Michigan as his principal residence, he is on active duty in the U.S. Armed Forces, stationed in Michigan, and files nonresident Michigan tax returns. Is he eligible for the principal residence exemption?
    Yes. Active-duty military personnel stationed in Michigan who occupy the property as principal residence remain eligible for the exemption even if they file nonresident tax returns.
  11. Chris owns and occupies Blue Acre in Michigan as his principal residence, he is on active duty in the U.S. Armed Forces, stationed in Michigan, and files California tax returns. Is he eligible for the principal residence exemption?
    Yes. Active-duty military personnel stationed in Michigan who occupy the property as principal residence remain eligible for the exemption even if they file tax returns in another state as a resident of another state.
  12. Chris owns and occupies Blue Acre in Michigan as his principal residence, he is on active duty in the U.S. Armed Forces stationed in California, and files nonresident Michigan tax returns. Is he eligible for the principal residence exemption?
    No. Active-duty military personnel stationed outside Michigan and filing non-resident Michigan tax returns are not eligible for the exemption.
  13. Chris owns and occupies Blue Acre in Michigan as his principal residence; he is on active duty in the U.S. Armed Forces stationed in California, and files California tax returns. Is he eligible for the principal residence exemption?
    No. Active-duty personnel stationed outside Michigan and filing as a resident of another state are not eligible for the exemption.
  14. Chris owns and occupies Blue Acre in Michigan as his principal residence and Chris files part-time resident Michigan tax returns. Is he eligible for the principal residence exemption?
    Yes. Filing part-time resident returns does not disqualify an owner; only filing non-resident or out-of-state resident tax returns do.
  15. Chris files Michigan tax returns as a resident but his wife, Sarah, files as a non-resident. Are both disqualified from the Principal Residence Exemption?
    No. Only Sarah is disqualified since she files non-resident tax returns. Chris may qualify if he owns and occupies the property as his principal residence.