In Rentschler v Township of Melrose, No. 33633, the Michigan Court of Appeals ruled in favor of a homeowner who claimed he was entitled to a homestead exemption on property that he rented for more than 14 days in a year.

Michigan’s Principal Residence Exemption (PRE), also referred to as the “homestead” exemption, exempts a principal residence from the tax levied by a local school district for school operating purposes if an owner of that principal residence claims an exemption as provided.

In Rentschler, the Court overturned a decision from the Michigan Tax Tribunal, which found that the homeowner was the owner of the property, that the property was residential, and that the homeowner had occupied the property for the majority of the tax years in question. Despite making these findings, the Tribunal denied the PRE because the homeowner had rented out the residence for more than 14 days in each year in question. The Tribunal relied on the Michigan Department of Treasury Guidelines, which state the following with respect to the homestead exemption: “[I]f an owner rents his property for more than 14 days a year, the property is not entitled to a principal residence exemption.”

On appeal, the homeowner argued that the PRE guideline relied on by the Tribunal in denying his exemption was contrary to the clear and unambiguous language of the Michigan General Property Tax Act. The Court of Appeals agreed and ruled that “[r]enting one’s home for more than 14 days does not disqualify a homeowner from the PRE.”

Following this decision, homeowners who meet the statutory requirements for the PRE will no longer be denied the homestead exemption because they rent their homes for more than 14 days. Furthermore, this decision is also a good reminder to homeowners that the Michigan PRE guidelines do not have the force of law.

Individuals may be able to request a review of the current tax year and the past three tax years. If you have questions about how this decision impacts your homestead exemption or any other information contained in this article, feel free to contact any of the experienced real estate attorneys at Dingeman & Dancer.