Skip to main content
Partial Principal Residence Exemption

Partial Principal Residence Exemption

Overview

This section explores when an owner occupying a property as a principal residence may qualify for only a partial principal residence exemption under MCL 211.7cc and MCL 211.7dd. It examines statutory definitions, case law interpretations, and practical implications for property owners, assessors, and legal practitioners.

Michigan law limits the principal residence exemption to the portion of property used as the owner’s principal residence, applying proportional rules for leased, mixed-use, and bed-and-breakfast properties under MCL 211.7cc and 211.7dd.

Specifically, MCL 211.7dd(c) limits the principal residence exemption to the portion of a dwelling or unit in a multiple-unit dwelling that is owned and occupied by the owner.

Under MCL 211.7dd(a), if less than 50% of the total square footage of living space of the dwelling is leased, the owner would qualify for full principal residence exemption but if more than 50% is rented, only a partial principal residence exemption is allowed. Common areas used by the renter are not counted as square footage of living space being leased. Nancy J. Wilson v. City of Grand Rapids, Mich App, No. 358657, Feb 9, 2023. Factors for determining leased square footage may include the contractual agreement between the owner and renter, the total living space and areas under the renter’s exclusive possession, whether the renter can make permanent changes and to which portions, whether they have subleasing rights and for which areas, and any obligations to maintain or repair parts of the premises.

MCL 211.7cc(16) allows a principal residence exemption only for the portion of a property’s taxable value used as the owner’s principal residence, whether in a multi-unit dwelling, multi-purpose structure, or when part of the parcel is used for another purpose.

For bed and breakfasts, MCL 211.7cc(30)(a) allows a principal residence exemption only for the portion of taxable value used as the owner’s residence plus 50% of common areas, with adjustments if the property was closed for 90 or more consecutive days. “Common area" includes, but is not limited to, a kitchen, dining room, living room, fitness room, porch, hallway, laundry room, or bathroom that is available for use by guests of a bed and breakfast or, unless guests are specifically prohibited from access to the area, an area that is used to provide a service to guests of a bed and breakfast. (MCL 211.7cc(34)(c)). To qualify as a Bed and Breakfast, the property must be classified as residential; have 10 or fewer sleeping rooms, including sleeping rooms occupied by the owner of the property, 1 or more of which are available for rent to transient tenants; serve meals at no extra cost to its transient tenants; and have a smoke detector in proper working order in each sleeping room and a fire extinguisher in proper working order on each floor. (MCL 211.7cc(34)(a)).

Partial Principal Residence Exemption Scenarios: Frequently Asked Questions

  1. Chris owns a duplex and lives in one unit while the other unit is vacant. Can he claim a 100% principal residence exemption?
    No. Chris can only claim the principal residence exemption for the unit Chris occupies. It must be reduced by the taxable value of the vacant unit. (MCL 211.7dd(c)).
  2. Chris owns a duplex and lives in one unit while the other unit is used for storage. Can he claim a 100% principal residence exemption?
    No. Chris can only claim the principal residence exemption for the unit Chris occupies. It must be reduced by the taxable value of the vacant unit. (MCL 211.7dd(c)).
  3. Chris owns a duplex and lives in one unit while the other unit is occupied by Chris’s grandpa. Chris’s grandpa is not the owner. Can he claim a 100% principal residence exemption?
    No. Chris can only claim the principal residence exemption for the unit Chris occupies. It must be reduced by the taxable value of the vacant unit. (MCL 211.7dd(c)). Chris’s grandpa is not an owner and thus not eligible for the principal residence exemption.
  4. Chris and Sarah own a two-unit duplex. Chris lives in one unit and Sarah lives in the other. Chris and Sarah are single. Is Chris eligible to claim a 100% principal residence exemption?
    No. Chris can only claim the principal residence exemption for the unit Chris occupies. Sarah can claim the principal residence exemption for the unit she occupies. Together, their claims may total 100% (MCL 211.7dd(c)).
  5. Chris owns a duplex and connects the two units with a wall and doorway, occupying both as his residence. Can he claim a 100% principal residence exemption?
    Yes. Since the common wall and doorway connect both units, the property is now considered one unit. Since Chris is occupying both units as one residence, he may claim a 100% PRE.
  6. Chris owns Blue Acre and resides there as his principal residence. He also rents part of the home to Donald. Donald has equal use and access to the common areas. Can he claim a 100% principal residence exemption?
    Yes. Chris could claim a 100% if the rented portion of a dwelling is less than 50% of the total square footage of living space in that dwelling. Mere use and access of the common area by the tenant shall not be counted as the portion of the square footage of the living space that is leased or rented. When determining the square footage of living space being leased, consider factors such as the contractual agreement between the owner and renter, the total living space and areas under the renter’s exclusive possession, whether the renter can make permanent changes and to which portions, whether they have subleasing rights and for which areas, and any obligations to maintain or repair parts of the premises.
  7. Chris owns Blue Acre, which is his principal residence. He rents out three bedrooms year-round through Airbnb or VRBO, totaling about 30% of the home’s square footage. Chris continues to live in the rest of the house as his primary residence. Can he claim a 100% principal residence exemption?
    Yes. Chris can rent bedrooms via Airbnb or VRBO and still claim the 100% principal residence exemption, provided it remains his primary residence, he continues to occupy over 50% of the home, and ownership requirements are met. DeForge v Township of Allouez, No. 357568 Mich App. May 26, 2022.
  8. Chris owns Blue Acre, his principal residence. He rents the entire property for short-term stays (over 14 days) through Airbnb or VRBO and stays at his parents’ house during rentals. Can he claim a 100% principal residence exemption?
    Possibly. Chris may retain a 100% principal residence if the property was and remains his principal residence. It is no longer his principal residence if he rents the property the majority of the year.  Other factors to determine principal residence include employment location, family’s primary home, address on tax returns, driver’s license, voter registration, mailing address, banking location, and the location of religious organizations and recreational clubs with which the taxpayer is affiliated. Rentschler v Melrose Twp, 322 Mich App 113; 910 N.W.2d 711 (2017).
  9. Chris’s principal residence is Blue Acre and also runs a daycare in his home. Can he claim a 100% principal residence exemption?
    No. He can only claim a partial principal residence exemption for commercial or business purposes. Chris would only be eligible for that portion of the taxable value of the property used as the principal residence of that owner. (MCL 211.7cc(16)).
  10. Chris owns Blue Acre, a commercial building with an auto repair shop on the lower level and an apartment upstairs which he occupies as a principal residence. Can he claim a 100% principal residence exemption?
    No. He can only claim a partial principal residence exemption for commercial or business purposes. Chris would only be eligible for that portion of the taxable value of the property used as the principal residence of that owner. (MCL 211.7cc(16)).
  11. Chris owns Blue Acre which contains two homes. One home is Chris’s principal residence, and the other home is used for storage. Can he claim a 100% principal residence exemption?
    No. Michigan law defines a principal residence as the one place where the owner has a true, fixed, and permanent home to which they intend to return. Chris can only have one principal residence. The exemption must be reduced by the portion of the property’s taxable value attributable to the second home used for storage.
  12. Chris owns Blue Acre, which has two dwellings: Home A and Home B. Chris lives in Home A as his principal residence, and Grandpa, a non-owner, lives in Home B. Can Chris claim a 100% principal residence exemption on Blue Acre?
    No. Michigan law defines a principal residence as the one place where the owner has a true, fixed, and permanent home. Chris can only claim the exemption for the portion of the property he occupies as his principal residence. The exemption must be reduced by the taxable value of Home B, which is occupied by Grandpa. (MCL 211.7dd(c)).
  13. Chris and Sarah own Blue Acre, which has two dwellings: Home A and Home B. Chris lives in Home A as his principal residence, and Sarah lives in Home B as hers. Both are single. Can Chris claim a 100% principal residence exemption on Blue Acre?
    No. Chris can only claim the principal residence exemption for the Home A which Chris occupies. Sarah can claim the principal residence exemption for Home B, the dwelling she occupies. Together, their claims may total 100% (MCL 211.7dd(c)).
  14. Chris owns Blue Acre, which has two homes: Home A and Home B. Chris lives in Home A as his principal residence, and Home B is vacant and dilapidated. Can Chris claim a 100% principal residence exemption on Blue Acre?
    Yes. If the value of the dilapidated building has little to no value, then Chris can claim a 100% principal residence exemption.
  15. Chris owns Blue Acre which consists of a 5,000 square foot dwelling.  Blue Acre is used as his principal residence and as a bed and breakfast. He occupies 2,000 square feet exclusively, and 1,000 square feet is shared common areas. Guest bedrooms total 2,000 square feet. What percentage principal residence exemption can Chris claim?
    Chris can only claim a 50% principal residence exemption. The square feet used exclusively as the principal residence of the owner is 2,000 square feet. The portion used both by guests and the owner is 1,000 square feet, so Chris can claim 50% or 500 square feet for that portion. (e.g., 2,000 + (50% of 1,000 or 500) = 2,500; 2,500/5,000 total = 50%).