Who Pays Transfer Tax in Michigan: Seller or Buyer?

In a Michigan home sale, the seller is the one legally responsible for paying the real estate transfer tax. That is the default rule for both the state tax and the county tax, and it is why the charge normally shows up as a deduction from the seller’s proceeds on the closing statement. Nothing in the law stops a buyer and seller from agreeing that the buyer will cover the cost as part of their negotiations, but the legal obligation stays with the seller regardless of who writes the check.¹

What the Seller Actually Pays

Michigan has two transfer taxes that stack on top of each other. The state tax, from Public Act 330 of 1993, is $3.75 for every $500 of the property’s value, with any fraction of $500 rounded up.¹ The county tax, from the Real Estate Transfer Tax Act of 1966, adds $0.55 per $500 in counties with populations under two million. Counties with a population of two million or more — currently only Wayne County — can charge up to $0.75 per $500 if the county board of commissioners authorizes it.²

Combined, that comes to $8.60 per $1,000 of the sale price in most of the state. On a $300,000 home in a typical Michigan county, the state portion is $2,250 and the county portion is $330, for a total of $2,580 out of the seller’s proceeds. In Wayne County at the top rate, the county portion rises to $450 and the total runs $2,700.

The tax is calculated on the property’s total value at the time of transfer, meaning fair market value rather than only the cash changing hands. It applies to residential and commercial sales alike and covers deeds, land contracts, assignments of land contracts, and any other recorded instrument that conveys an interest in real property.³

Can the Buyer Agree to Pay It Instead?

Yes. The transfer tax is a negotiable closing cost like any other. A buyer who wants to make a stronger offer in a competitive market can offer to pay the seller’s transfer tax, and the parties can write that into the purchase agreement.

What that agreement does not do is shift the legal liability. If the tax goes unpaid for any reason, the state looks to the seller as the party on the hook. The practical effect of a buyer-pays agreement is simply that the money moves differently on the closing statement: the buyer brings extra funds to closing, and the seller’s proceeds are not reduced by the tax. For a seller negotiating an offer, this is worth asking about directly, because on a mid-priced home it can mean two or three thousand dollars in the seller’s pocket.

How the Payment Happens at Closing

Sellers almost never deal with the transfer tax themselves. The title company or closing attorney handling the sale calculates the amount, pulls it from the closing funds, buys the required documentary stamps, and submits everything to the county register of deeds along with the deed.¹

The register of deeds will not record a deed without those stamps affixed, or without a valid exemption noted on the face of the document. A deed submitted without either gets sent back. That recording requirement is the main reason transfer tax disputes are rare: nothing moves forward until the tax is paid or exempted, so the question of who pays is almost always settled on the closing statement rather than fought over later.

When No One Pays Because the Transfer Is Exempt

Michigan exempts a long list of transactions from both the state and county taxes. The exemption has to be noted on the deed at the time of recording. The main categories:

Transfers between spouses that create or end a tenancy by the entireties.⁴
Transfers from a parent to a child, stepchild, or adopted child, and from a grandparent to a grandchild, step-grandchild, or adopted grandchild. These run in one direction only: a child-to-parent transfer is not on the exempt list.
Transfers where the grantor is the United States, the State of Michigan, a political subdivision, or a government officer acting officially, and deeds given to government grantees under federally guaranteed or insured loans.
Transfers through mortgage foreclosure, including deeds in lieu of foreclosure. The exemption applies only to the foreclosure itself; when the foreclosing entity later resells the property, that sale is fully taxable.
Conveyances where the total consideration is less than $100, deeds that confirm title already held by the grantee, deeds that correct boundary lines with no money changing hands, transfers under a court order (unless the order specifies a dollar amount), and deeds given as collateral for a loan.
Land contracts where legal title does not pass until the full purchase price is paid. The tax becomes due only when the deed eventually transfers, which prevents double taxation.

There is also an exemption worth knowing about for sellers in a declining market. If you sell your principal residence in an arm’s-length transaction at fair market value, and the property’s state equalized valuation at the time of sale is equal to or less than the SEV when you acquired the home, you may be exempt from the state portion of the tax.⁴ You have to be claiming the principal residence exemption under Section 7cc of the General Property Tax Act, and the comparison is between SEV figures, not sale prices.

Getting a Refund If You Overpaid

Sellers who paid the state transfer tax at closing and later realize they qualified for an exemption can apply for a refund by filing Form 2796 with the Michigan Department of Treasury.⁵ The filing deadline is four years and 15 days from the date of the sale.⁶

Every application needs the settlement statement (HUD-1 or closing disclosure) and a copy of the recorded deed showing the transfer tax stamp. The settlement statement has to show costs and credits for both parties, because only the person who actually paid the tax can claim the refund. So if the buyer paid the seller’s transfer tax at closing, the buyer is the one who files for the refund.⁶ If the claim is based on the declining-value principal residence exemption, you also need proof of the SEV at acquisition and in the year of sale. Property tax statements from those two dates will do it.

One Exception: Controlling Interest Transfers

The seller-pays rule assumes a conventional sale with a deed. Michigan’s transfer tax also reaches another kind of transaction: acquiring a controlling interest in an entity (a corporation, LLC, or partnership) when real property makes up 90% or more of the entity’s assets.³ The tax is calculated on the value of the real property, prorated to the percentage of the interest transferred.

Because there is no deed to record in these deals, the normal closing-table collection does not happen. The tax has to be paid to the county treasurer within 15 days of the transfer, and in practice the acquiring party handles it as part of the deal mechanics.³ Anyone buying or selling an entity that holds significant Michigan real estate should price this into the deal from the start.

1
Michigan Legislature. State Real Estate Transfer Tax Act (Act 330 of 1993)
2
Michigan Legislature. Real Estate Transfer Tax Act (Act 134 of 1966)
3
Michigan Legislature. Michigan Code 207.523 – Written Instruments Subject to Tax
4
Michigan Legislature. Michigan Code 207.526 – Written Instruments and Transfers of Property Exempt From Tax
5
State of Michigan. State Real Estate Transfer Tax (SRETT) Forms
6
Michigan Department of Treasury. Application for State Real Estate Transfer Tax (SRETT) Refund