Sandra is transferring her residential property in Lansing to her adult daughter as a gift. The property has a fair market value of $250,000, but no money changes hands. Sandra's agent tells her the Michigan real estate transfer tax will be based on the $250,000 fair market value. Is the agent correct, and does a transfer tax exemption apply?
Correct Answer
A) The agent is incorrect; transfers between family members are exempt from Michigan real estate transfer tax under MCL 207.505
Under MCL 207.505(1)(a), transfers of property between family members — including parent to child — are exempt from Michigan's state real estate transfer tax. The county transfer tax under MCL 207.526 also provides a similar exemption for family transfers. Because no consideration is exchanged and the transfer is between family members, Sandra owes no transfer tax.
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Related Topics & Key Terms
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Related Concepts
Homestead portability allows homeowners to transfer a portion of their accumulated homestead tax savings to a new homestead in the same state.
The income approach estimates a property's value based on the income it generates by converting net operating income into a value estimate using a capitalization rate. It is the preferred method for income-producing properties.
Many states have laws to limit how much property taxes can increase each year, regardless of market value fluctuations.
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