Principal Residence Exemptions and Nursing Homes

Cities are cracking down on Principal Residence Exemptions.  A Principal Residence Exemption (“PRE”) exempts a residence from the 18 mills of tax levied by a local school district for school operating purposes.  This is approximately a $1,800.00 reduction in property taxes for every $100,000.00 of assessed value.  This exemption doesn’t change taxable value, instead it applies to millages only.

To qualify for a PRE, the property owner has to be a Michigan resident that occupies the property as a principal residence.  A person is not entitled to a PRE in many different instances.  One of them is when the person is residing in a nursing home with no intent to return to their residence.  If, however, they intend to return home while they reside in the nursing home, they may maintain the PRE on the property.  Further provided that the property is not being rented and that they are not declaring another PRE.  Evidence of no intention to return to the residence could be a change of the address on the individual’s drivers license, voter’s registration, bills or the like.  Make sure that your parent(s) talk to an attorney before discussing any recent move with the city assessor. Also, be careful how you help your parents and talk to an attorney first!

You also want to make sure that if your parent is trying keep their PRE on their residence while in a nursing home that they do not also claim a property tax credit on the nursing home.  This would give the city assessor ammunition to revoke your parents PRE and chase them for up to 3 years of back taxes.  Losing a PRE can result in thousand of dollars being charged to the property tax bill for the residence!

If your parent(s) are making a move into a nursing home, make sure that you let your parent(s) or your parent(s)’ accountant/tax preparer know whether or not your parent(s) desire to keep the PRE on their residence.