- Michigan assesses transfer taxes at the state, county and local town levels. The tax is due when the deed is presented to the register of deeds to be recorded. The tax rate is based on the total consideration, or sales price, listed on the deed. As of July 2011, the state rate is approximately $3.75 per $500 of the consideration. Many counties charge $0.55 per $500, but this can vary Some towns, such as Flint and Genesee, charge an additional tax on property transactions.
- According to the IRS, transfer taxes paid during a property transaction may not be filed as a deduction on the Schedule A. Because of this, these taxes cannot be deducted on state tax returns either. Other taxes that fall under this category include homeowner's association fees and utility service fees.
- Unlike transfer taxes, which are paid once, property taxes are paid yearly. These taxes are considered deductible from the federal tax return. In addition to this deduction, Michigan offers a homestead property tax credit for state returns. In order to qualify for the credit, the property must be considered your homestead, that is, it must be the property you live in permanently for the majority of the year. Second homes or vacation homes do not qualify for this exemption. Additionally, your total household income cannot exceed $82,650 as of July 2011.
- Although transfer taxes are not directly deductible, they still have an impact on the tax return. If the seller pays the transfer tax it can be considered an expense of the sale and will be deducted from the total profit made on the sale. This will affect the gains-and-loss section of the tax return. The same is true if the buyer pays the property taxes, only he will not realize this deduction until he chooses to sell the property in the future.
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