Obtaining a refund of transfer tax paid on the sale of a home that has lost value
Thanks to a Michigan Supreme Court decision and legislation in which the Michigan Realtors® played a key role, Michigan home sellers whose homes have declined in value since they purchased them have an exemption from transfer tax and can obtain a refund if they paid the transfer tax. A sale is exempt from state transfer tax under exemption (u) if the State Equalized Value (SEV) at the time of sale is equal to or less than the SEV at the time it was purchased, so long as the sale is for fair market value. If the exemption would have applied but the transfer tax was paid, the party who paid the tax (almost always the seller), can obtain a refund for a sale on or after June 24, 2011. The exemption matters – at 0.75%, state transfer tax on the sale of home for $200,000, for example, is $1,500.
The Michigan Department of Treasury website provides a transfer tax refund form for filing the request for refund, along with directions as to the required documentation for obtaining the refund.
To obtain the refund, the property owner will need:
- Proof of payment of the transfer tax. This will be shown on a copy of the recorded deed or you can provide copies of the receipt from the County Treasurer accompanied
by a copy of the Form L-4258 Real Estate Transfer Tax Valuation Affidavit that was filed at the time of purchase or the time of sale. A copy of the recorded deed can be
obtained from the Register of Deeds.
- A copy of the settlement statement/closing statement showing which party paid the transfer tax.
Proof of purchase and purchase price in the year of purchase, usually by a copy of the recorded deed or the Form L-4258 Real Estate Transfer Tax Valuation Affidavit.
- Documentation of the State Equalized Value (SEV) in the year of purchase. This can be found on a tax bill or assessment notice for that year.
- Proof of date of sale and proof of sale price of property, again usually by a copy of the recorded deed or the Form L-4258 Real Estate Transfer Tax Valuation Affidavit.
- Documentation of the State Equalized Value (SEV) in the year of sale. This can be found on a tax bill or assessment notice for that year.
- The sale price will ordinarily appear on the deed and if not, on the Form L-4258 Real Estate Transfer Tax Valuation Affidavit.
If you do not have a tax bill or assessment notice for each year, the SEV for the year of purchase and the year of sale can be obtained from the local city of township treasurer or assessor by addressing a Freedom of Information Act request to the city or township requesting documentation to show it. A form is provided. The street address will usually be sufficient identification, but if it is available, you may add the tax parcel identification number, which usually appears on the deed and on the Real Estate Transfer Tax Valuation Affidavit.
2016 Michigan Realtors®