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What Is Michigan's Real Estate Transfer Tax?

Michigan imposes a tax upon the seller or grantor of the following instruments recorded at the county register of deeds:

  • Contracts for the sale or exchange of real estate or any interest therein (or any combination of sales or exchanges) or any assignment or transfer thereof. MCL 207.502(1)(a) and MCL 207.523(1)(a).
  • Deeds or instruments of conveyance of real property or any interest therein, for a consideration. MCL 207.502(1)(b) and MCL 207.523(1)(b).
  • Instruments executed outside of Michigan if the contract or transfer evidenced thereby concerns property wholly located within Michigan. MCL 207.503 and MCL 207.524.

There are two transfer taxes levied:

  • The state real estate transfer tax is levied at the rate of $3.75 for every $500.00 or fraction of $500.00 of the total value of the property being transferred. MCL 207.525(1).
  • The county real estate transfer tax is levied at the rate of $0.55 for every $500.00 or fraction of $500.00 of the total value of the property being transferred. If the county has a population of 2 million or more, then the county can levy a rate of $0.75 for every $500.00 or fraction of $500.00 of the total value of the property being transferred. MCL 207.504.

Fortunately, there are several exemptions available at law to avoid the real estate transfer tax. The written instrument must clearly state the exemption being claimed on its face before recording. Otherwise, the transfer taxes must be paid at the county treasurer's office and a documentary stamp must be affixed to the instrument indicating payment before it can be recorded. The following exemptions apply to BOTH the state and county real estate transfer tax:

  • A written instrument in which the value of the consideration for the property is less than $100.00. MCL 207.505(a) and MCL 207.526(a).
  • A written instrument evidencing a contract or transfer that is not to be performed wholly within this state only to the extent the written instrument includes land lying outside of this state. MCL 207.505(b) and MCL 207.526(b).
  • A written instrument that this state is prohibited from taxing under the United States Constitution or federal statutes. MCL 207.505(c) and MCL 207.526(c).
  • A written instrument given as security or an assignment or discharge of the security interest. MCL 207.505(d) and MCL 207.526(d).
  • A written instrument evidencing a lease, including an oil and gas lease, or a transfer of a leasehold interest. MCL 207.505(e) and MCL 207.526(e).
  • A written instrument evidencing an interest that is assessable as personal property. MCL 207.505(f) and MCL 207.526(f).
  • A written instrument evidencing the transfer of a right and interest for underground gas storage purposes. MCL 207.505(g) and MCL 207.526(g).
  • A written instrument in which the grantor is the United States, this state, a political subdivision or municipality of this state, or an officer of the United States or of this state, or a political subdivision or municipality of this state, acting in his or her official capacity. MCL 207.505(h)(i) and MCL 207.526(h)(i).
  • A written instrument given in foreclosure or in lieu of foreclosure of a loan made, guaranteed, or insured by the United States, this state, a political subdivision or municipality of this state, or an officer of the United States or of this state, or a political subdivision or municipality of this state, acting in his or her official capacity. MCL 207.505(h)(ii) and MCL 207.526(h)(ii).
  • A written instrument given to the United States, this state, or 1 of their officers acting in an official capacity as grantee, pursuant to the terms or guarantee or insurance of a loan guaranteed or insured by the grantee. MCL 207.505(h)(iii) and MCL 207.526(h)(iii).
  • A conveyance from a spouse or married couple creating or disjoining a tenancy by the entireties in the grantors or the grantor and his or her spouse. MCL 207.505(i) and MCL 207.526(i).
  • A judgment or order of a court of record making or ordering a transfer, unless a specific monetary consideration is specified or ordered by the court for the transfer. MCL 207.505(j) and MCL 207.526(l).
  • A written instrument used to straighten boundary lines if no monetary consideration is given. MCL 207.505(k) and MCL 207.526(m).
  • A written instrument to confirm title already vested in a grantee, including a quitclaim deed to correct a flaw in title. MCL 207.505(l) and MCL 207.526(n).
  • A land contract in which the legal title does not pass to the grantee until the total consideration specified in the contract has been paid. MCL 207.505(m) and MCL 207.526(o).
  • A written instrument evidencing the transfer of mineral rights and interests. MCL 207.505(n) and MCL 207.526(q).
  • A written instrument creating a joint tenancy between 2 or more persons if at least 1 of the persons already owns the property. MCL 207.505(o) and MCL 207.526(r).

The following additional exemptions apply ONLY to state real estate transfer taxes and NOT county real estate transfer taxes:

  • A conveyance from an individual to that individual's child, stepchild, or adopted child. MCL 207.526(j).
  • A conveyance from an individual to that individual's grandchild, step-grandchild, or adopted grandchild. MCL 207.526(k).
  • A transfer between any corporation and its stockholders or creditors, between any limited liability company and its members or creditors, between any partnership and its partners or creditors, or between a trust and its beneficiaries or creditors when the transfer is to effectuate a dissolution of the corporation, limited liability company, partnership, or trust and it is necessary to transfer the title of real property from the entity to the stockholders, members, partners, beneficiaries, or creditors. MCL 207.526(p)(i).
  • A transfer between any limited liability company and its members if the ownership interests in the limited liability company are held by the same persons and in the same proportion as in the limited liability company prior to the transfer. MCL 207.526(p)(ii).
  • A transfer between any partnership and its partners if the ownership interests in the partnership are held by the same persons and in the same proportion as in the partnership prior to the transfer. MCL 207.526(p)(iii).
  • A transfer of a controlling interest in an entity with an interest in real property if the transfer of the real property would qualify for exemption if the transfer had been accomplished by deed to the real property between the persons that were parties to the transfer of the controlling interest. MCL 207.526(p)(iv).
  • A transfer in connection with the reorganization of an entity and the beneficial ownership is not changed. MCL 207.526(p)(v).
  • A transfer made pursuant to a bona fide sales agreement made before the date the tax is imposed under MCL 207.503 and MCL 207.504, if the sales agreement cannot be withdrawn or altered, or contains a fixed price not subject to change or modification. MCL 207.526(s).
  • A written instrument evidencing a contract or transfer of property to a person sufficiently related to the transferor to be considered a single employer with the transferor under section 414(b) or (c) of the internal revenue code of 1986, 26 USC 414. MCL 207.526(t).
  • A written instrument conveying an interest in property for which an exemption is claimed by the seller or transferor under section 7cc of the general property tax act, 1893 PA 206, MCL 211.7cc, if the state equalized valuation of that property is equal to or lesser than the state equalized valuation determined as of the first tax day after the issuance of a certificate of occupancy for the residence, or the date of acquisition of the property, whichever comes later, by the seller or transferor for that same interest in property and the transaction was for a price at which a willing buyer and a willing seller would arrive through an arms-length negotiation. Notwithstanding section 22 of 1941 PA 122, MCL 205.22, and section 3(4) of this act, if the seller or the buyer who has paid the tax on behalf of the seller believes that the property was eligible for an exemption under this subdivision at the time of transfer, the seller or the buyer who has paid the tax on behalf of the seller may request a refund from the department in a form and manner determined by the department. This subdivision is retroactive and applies to a sale, exchange, assignment, or transfer beginning 4 years immediately preceding the effective date of the amendatory act that amended this sentence subject to the statute of limitations period provided in section 27a of 1941 PA 122, MCL 205.27a. A taxpayer that claimed a refund under this subdivision prior to the effective date of the amendatory act that added this sentence and whose refund was denied and not appealed in accordance with section 21 or 22 of 1941 PA 122, MCL 205.21 and 205.22, may claim a refund under this subdivision notwithstanding section 22 of 1941 PA 122, MCL 205.22. MCL 207.526(u).
  • A written instrument transferring an interest in property pursuant to a foreclosure of a mortgage including a written instrument given in lieu of foreclosure of a mortgage. This exemption does not apply to a subsequent transfer of the foreclosed property by the entity that foreclosed on the mortgage. MCL 207.526(v).
  • A written instrument conveying an interest from a religious society in property exempt from the collection of taxes under section 7s of the general property tax act, 1893 PA 206, MCL 211.7s, to a religious society if that property continues to be exempt from the collection of taxes under section 7s of the general property tax act, 1893 PA 206, MCL 211.7s. MCL 207.526(w).

Sellers and grantors should be aware of these valuable exemptions before downloading a sample quitclaim deed from the Internet and trying to handle the conveyance themselves while incurring all the applicable state and county transfer taxes. It is worth the small investment in getting sound legal advice from a lawyer before proceeding into the unknown. If you need assistance or advice regarding any property transfer in the State of Michigan, do not hesitate to contact the property law attorneys at Kershaw, Vititoe & Jedinak PLC.

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