Are You Entitled to a State Real Estate Transfer Tax (SRETT) Refund?
When real property (land as well as houses and buildings physically attached thereto) is sold in the State of Michigan, the State collects a “transfer” tax at the rate of $7.50 per $1,000 of value. This tax is typically paid by the seller and collected by the closing agent at the time of closing. It must be paid to the local register of deeds in order to get the deed to the property recorded. (There is also a county tax of $1.10 per $1,000 of value that is also due and is also typically collected from the seller). The amount of the tax is based upon the purchase price for the property. So, for example, if the purchase price were $100,000, the state real estate transfer tax (SRETT) would be $750 (plus another $110 of county tax).
If the property is residential in nature and was transferred on or after June 24, 2011, and the State Equalized Value (SEV) – which can be found on the tax bill for that year – on the date of sale was equal to or lesser than the SEV at the time of purchase, the seller (or whoever paid the state transfer tax) may be entitled to a refund. There are two caveats here. First, the property must have been sold for less than 2 x SEV. Secondly, the transaction must be for a price at which a willing buyer and a willing seller would arrive through an arms-length negotiation. This is typically not a problem, particularly if the property were sold through a realtor, to a third-party stranger, and there were offers and counter-offers back and forth.
The amount of the refund could be significant. Again, on a $100,000 sale, the state transfer tax would be $750. On a $200,000 sale the transfer tax would have been $1,500. (Note, there is no ability to obtain a refund of the county transfer tax).
In order to figure out if you are entitled to a refund, and make application for the same, you should complete Michigan Department of Treasury form 2796 (revised 4-16), and attach the required documentation, when sending in the completed form in to the Michigan Department of Treasury. According to this form, transfer tax refund can be applied for within 4 years and 15 days from the date of sale.
If you are selling your house, there is a specific exemption that should be recited in the body of the deed in order to avoid paying the state transfer tax. If you believe you would be eligible for such exemption, be sure to speak with your realtor or a knowledgeable professional about this, before closing.
If claiming such a refund may apply to you, don’t sit on your rights or you may find that your claim is time barred. Should you need assistance in this regard, need help in connection with a real estate transaction, or some other legal matter, please contact the knowledgeable professionals at Damon, Ver Merris, Boyko & Witte, PLC. We are here to help. – Larry A. Ver Merris
While this posting originates from a law office, none of the contents should, in any way, be considered legal advice. If you have not signed a retention letter describing the legal services to be provided and the amount to be paid for such services, you are not a client of this firm.