Does Michigan Have a Homestead Exemption? PRE Rules and Claims

Michigan’s version of a homestead exemption is called the Principal Residence Exemption, or PRE, and it removes up to 18 mills of local school operating tax from the home you own and live in as your main residence.¹ You claim it by filing a short affidavit with your local tax office. Michigan also uses the word “homestead” for two other, separate programs: the Homestead Property Tax Credit on your state income tax return, and the homestead exemption that protects home equity in bankruptcy. All three are covered below, but the PRE is the one most homeowners mean when they ask about a Michigan homestead exemption.

What the PRE Saves You

A mill equals $1 of tax for every $1,000 of taxable value. Michigan assesses property at 50% of true cash value, so a home worth $300,000 has a taxable value of roughly $150,000.² Without the PRE, that homeowner pays the full local school operating millage on $150,000. With the PRE, up to 18 of those mills drop off the bill. On a $150,000 taxable value, 18 mills equals $2,700 a year.

The PRE does not reduce your home’s assessed or taxable value, and it does not touch county, city, township, or special assessment levies. It removes the school operating piece and nothing else.

How to Claim the Exemption

The PRE is not automatic. You have to file a Principal Residence Exemption Affidavit (Form 2368) with the local tax collecting unit where the property sits. The affidavit confirms 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 another state.³

Two deadlines apply each year:

File by June 1 to cover that year’s summer tax levy and all later levies.
File by November 1 to cover that year’s winter tax levy and all later levies.

Miss both and you lose the exemption for that tax year. Once filed, the exemption carries forward automatically until you rescind it or the property changes hands. There is no annual renewal.³

One exemption per person. Vacation homes, second homes, and rental properties don’t qualify. If you own two Michigan houses, you pick the one you actually live in.

A note on buying: when ownership transfers, the previous owner’s PRE does not carry over to you. File a fresh affidavit by the next June 1 or November 1 to claim the exemption on your new home.

When You Have to Rescind

When the property stops being your principal residence, you must file a Request to Rescind PRE (Form 2602) with the local assessor within 90 days.⁴ That covers moving out, selling, or renting the property 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 home has to rescind as well.

The late-filing penalty is $5 a day up to $200. The real exposure is bigger: if the exemption gets denied retroactively, you owe the school operating taxes you were spared, plus interest.⁴

False Claims

Filing a false PRE affidavit can bring perjury charges carrying up to one year in jail, fines between $1,000 and $5,000, and 500 to 1,500 hours of community service.⁴ Local assessors audit exemptions, and the Department of Treasury can cross-reference affidavits statewide. Claiming the PRE on a rental or a home you don’t actually live in is a quick way to create a serious tax problem.

Keeping the PRE in Special Situations

Buying a New Home Before Selling the Old One

You can claim the PRE on your new principal residence and keep the exemption on the old property for up to three tax years through a conditional rescission. The old home must be vacant, listed for sale, not leased, and not used for any commercial purpose. File a conditional rescission form with the local tax collecting unit by the normal affidavit deadline.³ If the house hasn’t sold after three tax years, or you start renting it out, the exemption on that property ends.

Active-Duty Military

Service members 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, haven’t established a new principal residence elsewhere, maintain or provide for maintenance of the property, and the property is not used commercially.³ This covers all branches of the Armed Forces, including reserve components and the National Guard.

Nursing Home or Assisted Living

An owner who moves to a nursing home, an assisted living facility, or another location for convalescence keeps the PRE under similar conditions: continued ownership, no new principal residence established, the property is maintained, and (starting with the 2018 tax year) the property is not leased or used commercially.⁵ The property no longer has to sit empty. Before 2018, any outside occupant killed the exemption; now the only restrictions are the lease and commercial-use bars.

Property Held in a Trust

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

Moving your home into a revocable trust where you (or your spouse) are the sole present beneficiary does not trigger a reassessment of taxable value, so taxes won’t jump just because the deed now runs to your living trust.⁷

Homestead Property Tax Credit (A Separate Program)

Many Michigan homeowners confuse the PRE with the Homestead Property Tax Credit. They are different. The PRE reduces your property tax bill directly. The Homestead Property Tax Credit is claimed on your Michigan income tax return using Form MI-1040CR and gives you a refundable credit based on how your property taxes compare to your household income.⁸ You can benefit from both in the same year.

Key features of the credit:

Both homeowners and renters can claim it. Renters treat 23% of their gross rent as property taxes paid.
Homeowners don’t qualify if the property’s taxable value exceeds $135,000, a threshold adjusted annually for inflation beginning with the 2021 tax year.⁸
The base maximum credit is $1,500 per year, also inflation-adjusted since 2021.
If the credit exceeds your Michigan income tax, the difference comes back to you as a refund.

Homeowners age 65 and older qualify for enhanced benefits, including a credit equal to up to 100% of the amount their property taxes exceed 3.5% of household income, capped at the annual maximum.⁹

Poverty Exemption for Low-Income Homeowners

Under MCL 211.7u, local boards of review can grant a partial or full exemption from property tax for homeowners who cannot afford their taxes due to poverty.¹⁰ Applicants must own and occupy the home as a principal residence, apply with the board of review, and provide federal and state income tax returns for everyone in the household. Qualification generally follows federal poverty guidelines or more generous local guidelines.

Two things to know. First, this exemption must be applied for every year; it does not carry forward like the PRE. Second, it can stack with the PRE, which for a qualifying household can bring the property tax bill close to zero.

Homestead Exemption in Bankruptcy

Michigan’s bankruptcy homestead exemption shares a name with the PRE and the income tax credit but has nothing in common with them. It protects a portion of your home equity from creditors in a bankruptcy case. Michigan debtors can choose between the federal and state exemption systems.¹¹

The Michigan state exemption protects up to $30,000 of equity in your homestead, rising to $45,000 if the debtor or a dependent is 65 or older or disabled at filing.¹¹ The federal bankruptcy homestead exemption under 11 U.S.C. § 522 is $31,575 per debtor.¹² Married couples filing jointly can each claim the exemption separately. Which system works better depends on the full set of exemptions available to you.

If Your PRE Is Denied

If the PRE is denied or revoked, the Michigan Tax Tribunal has jurisdiction over the dispute. For most residential property disputes, the owner must first protest to the local Board of Review before heading to the Tribunal.¹³ PRE denials issued by the Department of Treasury are an exception and can be appealed directly to the Tribunal.

The Tribunal reviews the evidence fresh, and the homeowner carries the burden of proving eligibility.¹³ For residential property, the filing deadline is generally July 31 of the tax year at issue. Bring documentation that ties you to the house: the affidavit you filed, utility bills, voter registration, and a driver’s license showing the property address. A win can mean reinstatement of the exemption and a refund of overpaid taxes. A loss can mean owing additional taxes plus interest.

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 206.520 – Income Tax Act (Excerpt)
9
Michigan Legislature. Services for Seniors
10
Michigan Legislature. Michigan Compiled Laws Section 211.7u – The General Property Tax Act (Excerpt)
11
Michigan Legislature. Michigan Compiled Laws Section 600.5451
12
Office of the Law Revision Counsel. 11 USC 522 – Exemptions
13
Michigan Legislature. Tax Tribunal Act (Excerpt)