Many Michiganders seek to retreat from harsh winters by flying South to their second homes in Florida. However, owning two homes can also lead to expensive property tax bills. We are often asked whether it is possible to reduce property taxes by claiming a principal residence exemption in Michigan and a homestead exemption in Florida. Unfortunately, in most circumstances, Michigan and Florida prohibit homeowners from claiming both the Michigan principal residence exemption and the Florida homestead exemption. A recent decision by the Florida Court of Appeals affirms this principal even where each spouse claims residency in the state where they seek the exemption.
Briefly, the Michigan principal residence exemption exempts a Michigan principal residence from the tax levied by the local school district for school operating purposes up to 18 mills.1 Michigan residents can apply for a principal residence exemption for property that is occupied as their principal residence, which is defined as the one place where an owner of the property has his or her true, fixed, and permanent home to which, whenever absent, he or she intends to return and that shall continue as a principal residence until another principal residence is established.2 To claim a principal residence exemption, a Michigan homeowner must file an affidavit with the local city or township tax assessor.
Likewise, Florida residents may generally claim a homestead exemption, which can provide a property tax valuation exemption of up to $50,000. To be eligible for the Florida homestead exemption, the person seeking the exemption must be a Florida resident, and the property must be the Florida resident's permanent residence. In Florida, homestead property is also protected from valuation increases which may not exceed the lesser of 3% or the increase in the Consumer Price Index from the prior year. 3 To claim a homestead exemption, a Florida resident must file an annual application with the county property appraiser.
A Michigan resident is not entitled to a principal residence exemption if that resident has claimed a substantially similar exemption, deduction, or credit on property in another state that has not been rescinded.4 Similarly, Florida law states that a person who is receiving or claiming the benefit of an ad valorem tax exemption or a tax credit in another state where permanent residency is required as a basis for the granting of that tax exemption or credit is not entitled to receive a Florida homestead exemption under the "Save Our Homes" provision of the Florida Constitution.5
A recent Florida Court of Appeals decision that spouses who constitute a "harmonious family unit," regardless of each having a separate principal permanent residence in a different state, cannot both claim a separate homestead tax exemption on their residences in those separate states. By way of example, the near-retirement Michigan couple who find themselves spending more time at their Florida condominium, cannot claim a homestead exemption for the Florida condominium based upon one spouse owning and having her principal residence in Florida, if the other spouse still claims the exemption in Michigan.
As a result, many husbands and wives who own residences in both Michigan and Florida and who inadvertently or intentionally claim both a Michigan principal residence exemption and a Florida homestead exemption may face additional taxes, penalties and interest and would be well-advised to consult with their legal counsel or tax professional.
Disclaimer: This article is meant for informational and discussion purposes only. It is not a comprehensive treatment of any specific legal topic. It cannot be used as a source of legal advice, either generally or applied to any specific situation. You should always consult an attorney regarding your individual circumstances.
Driggers, Schultz & Herbst, P.C . is a Troy, Michigan full-service law firm serving individual, businesses, and institutions with proven and experienced legal representation in areas including estate planning, tax, aviation, business sale and succession, real estate and commercial transactions. Firm attorneys are all admitted in Michigan and variously admitted to practice in Florida, Illinois, Maryland, North Carolina, Ohio and Washington, D.C.