Sold Your Downriver Home? Check for a Transfer Tax Refund
Can you get Michigan’s state transfer tax back after you sell?
Sometimes, yes. If the sale of your home met three tests, Michigan treats it as exempt from the state real estate transfer tax, and if you paid the tax anyway, you can ask Treasury for it back.
The state tax gets paid when the deed is recorded. Treasury’s documentation notice says the tax is due at the time the deed is recorded, and Form 2796 quotes the law saying the tax is collected when the deed is submitted for recording. Your settlement statement shows which side was charged.
The refund comes from a 2015 law. Treasury’s refund notice says 2015 PA 217 put the three tests into the statute, and Form 2796 cites section 6 of PA 217 of 2015 as the source of the exemptions it covers. Form 2796 is Treasury’s application for the refund.
The refund comes by request. If you want the money, you file for it. Until Treasury reviews your claim, treat the refund as possible, not promised, and don’t spend it in your head yet. Our posts on Wayne County transfer tax and Monroe County transfer tax explain how the tax shows up at closing in the first place.
Which three tests decide the refund?
All three have to be true. Treasury’s refund notice, its documentation notice and Form 2796 each describe them. Whether your sale meets them is Treasury’s call, and a tax professional can help you read your own facts.
Work through them in order. The second one takes some digging through old tax paperwork, and it’s the one most worth writing down, because you’ll need the same numbers again when you file.
Did you claim a principal residence exemption on the home?
Treasury’s documentation notice quotes the law’s requirement that a principal residence exemption was claimed on the property, and Form 2796 says a principal residence exemption must have been claimed by the seller. If you weren’t claiming that exemption on the home you sold, ask your tax professional before you go further.
Before you move on, find a record that shows you claimed that exemption on the home, such as the paperwork you filed when you claimed it, or ask your assessor. Keep it with the rest of your papers in case questions come up.
If you moved before the house sold, our post on keeping your principal residence exemption when you move first covers that side of it.
Was the SEV when you sold no higher than the starting SEV?
Treasury’s refund notice and its documentation notice both say the state equalized value (SEV) at the time of the sale has to be less than or equal to the SEV when you bought or acquired the home. Form 2796 describes the starting date in more detail, so read its Part 4 closely or ask Treasury which starting date applies to your home.
Here’s how to get the numbers in front of you, before you spend time on anything else:
- Find the tax records that show the SEV for the starting year and for the year you sold.
- Write down both numbers, the years they came from and where you found them.
- Take both numbers to your tax professional, or ask Treasury, to confirm how they compare under the test before you decide whether to file.
If you can’t find the old records, call your city or township assessor’s office and ask for the SEV history on the parcel. Have your parcel number handy if you can find it.
Was it an arm’s-length sale?
The sale has to be at a price a willing buyer and a willing seller would reach through arm’s-length negotiation. Treasury’s refund notice, its documentation notice and Form 2796 all use that test. If you sold to a relative or below market, ask your tax professional whether the sale meets that test before you file.
If you think one of the tests isn’t met, ask Treasury or your tax professional before you decide not to file. If a test is a close call, write down why you think it’s met, gather the papers that show it, and get that second set of eyes on it before you mail anything.
Who can file, and what do you have to prove?
The party who actually paid the tax files, and has to prove it. Treasury’s documentation notice says only the party that paid the state transfer tax may claim the refund, and Form 2796 says the same.
That’s why the settlement statement matters so much. Read the transfer tax lines on your statement before you do anything else, and if they’re unclear, ask the title company that closed your sale which side was charged.
Treasury’s documentation notice says you must show that you actually paid the tax and that the sale was exempt, and it asks for your final signed settlement statement, HUD-1 or Closing Disclosure clearly showing you incurred the tax. Form 2796 asks for that statement too.
Part 4 of Form 2796 lists every document claimants must submit. Read it before you start pulling papers, and gather everything it lists, so your packet is complete the first time.
If you’re missing something, Treasury’s documentation notice says to contact the escrow agent, title company or attorney that prepared your documents, and the form also points to the title company for copies. Our post on what a title company does at a Michigan closing covers the settlement statement and recording steps.
How do you file the refund claim?
You file Form 2796 with Treasury, along with copies of your supporting documents. Both Treasury’s documentation notice and the form say to mail the completed application and copies to Treasury’s Special Taxes Division. Before you start, pull the current version of the form, since forms get revised and an old copy saved on your computer may not match. Then work through it in this order:
- Get the SEV numbers first. Have your tax professional or Treasury confirm the comparison before you gather the rest.
- Get your closing papers. Your final signed settlement statement and a copy of the recorded deed.
- Get everything else Part 4 lists. Check each item off as you add it to the packet.
- Fill out Form 2796. Follow its instructions, including the signature section.
- Send copies, keep originals. Keep a full copy of the packet for yourself, too.
- Note the date you mailed it. If Treasury asks a question later, you’ll want the same packet and date in front of you.
If more than one of you sold the home, ask Treasury or your tax professional who should claim and sign. Then agree among yourselves who handles the paperwork and who keeps the master copy.
How long do you have to file?
Not forever. Form 2796 and Treasury’s refund notice both point to the statute of limitations for these refunds, and the form sets a filing deadline. Check the deadline printed on the current form before you mail it.
So don’t let this sit in a drawer. If you sold within the last few years and haven’t checked, gather the SEV numbers this week. If you’re close to the deadline, call Treasury’s Special Taxes Division before you count on the refund. If you’re not sure whether an older sale is still inside the window, ask them before you put the packet together, so you don’t spend an evening on paperwork for a claim that can’t go anywhere.
A simple way to keep it moving: put one evening on the calendar for the SEV numbers, and a second one for the packet if the numbers work. Keep everything in one folder, paper or digital, with a short note on top listing what’s inside.
And if you’re still in the middle of a sale right now, save your final settlement statement and a copy of the recorded deed as soon as they’re in your hands. If your sale turns out to qualify, the claim leans on both of them.
Frequently asked questions
Do I have to be sure I qualify before I file?
You don't have to decide it alone. Treasury's refund notice tells sellers who believe their sale qualifies to file Form 2796 with the required documentation so Treasury can review eligibility, and the form says a seller who later believes the sale qualifies may request the refund by filing it. Fill it out carefully and truthfully, and let Treasury make the call.
Where do I send Form 2796?
Treasury's documentation notice and the form both give the same address: Michigan Department of Treasury, Special Taxes Division, Miscellaneous Taxes and Fees/SRETT, PO Box 30781, Lansing MI 48909. Send the completed form with copies of your supporting documents.
Can the buyer file for the refund instead of me?
Only if the buyer is the one who paid the state transfer tax on your behalf. Treasury's refund notice says a seller, or a buyer who paid the tax on behalf of a seller, may file, and the documentation notice says only the party that paid the tax may claim the refund.
Who answers questions about a transfer tax refund?
Treasury's Special Taxes Division, Miscellaneous Taxes and Fees Unit, at 517-636-0515. Both Treasury's documentation notice and Form 2796 list that number.
Sources
- Michigan Department of Treasury, Michigan State Real Estate Transfer Tax Refunds for Transfers from June 24, 2011 to Present (issued Feb. 5, 2016)
- Michigan Department of Treasury, Sufficient Documentation When Claiming Exemption From State Real Estate Transfer Tax Under MCL 207.526(u) (Feb. 1, 2017)
- Michigan Department of Treasury, Form 2796, Application for State Real Estate Transfer Tax (SRETT) Refund (Rev. 09-18), copy hosted by Genoa Township
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