A home, whether a principal residence, second home or rental property, is often our largest asset. Ongoing maintenance, repairs and improvements to a home are important to preserve and increase the value of that asset. With home ownership also comes property tax obligations. Tax bills in Michigan are calculated by multiplying the taxable value of the property by the local tax millage rate. The taxable value can only increase each year by 5% or the Consumer Price Index, whichever is less, unless it is uncapped after a transfer of ownership occurs or new construction is added to the property.
Could maintenance, repairs and improvements increase the taxable value of your home? Thanks to the Mathieu-Gast Home Improvement Act, MCL 211.27(2) (the “Act”), the answer to that question is often “no.” According to the Act, “[t]he assessor shall not consider the increase in true cash value that is a result of expenditures for normal repairs, replacement, and maintenance in determining the true cash value of property for assessment purposes until the property is sold.” Normal repairs, replacement and maintenance include:
- outside painting;
- repairing or replacing siding, roof, porches, steps, sidewalks, or drives;
- repainting, repairing, or replacing existing masonry;
- replacing awnings;
- adding or replacing gutters and downspouts;
- replacing storm windows or doors;
- insulating or weatherstripping;
- complete rewiring;
- replacing plumbing and light fixtures;
- replacing a furnace with a new furnace of the same type or replacing an oil or gas burner;
- repairing plaster, inside painting, or other redecorating;
- new ceiling, wall, or floor surfacing;
- removing partitions to enlarge rooms;
- replacing an automatic hot water heater;
- replacing dated interior woodwork;
- installing, replacing, or repairing an alternative energy system, without regard to ownership of the system, with a generating capacity of not more than 150 kilowatts, the annual energy output of which does not exceed the annual energy consumption measured by the utility-provided electrical meter on the system to which it is connected.
Structural additions are not covered by the Act. Additionally, the Act applies to residential property only, which can include certain rental homes. If you are planning to make improvements to your property, you can file a Form 865 Request for Nonconsideration of True Cash Value of Normal Repair, Replacement, and Maintenance Expenditures with the assessor to ensure proper application of the Act. However, except for certain limited circumstances, assessors are required to give non-consideration treatment to known qualifying changes to a home, even if the taxpayer has not filed the Form 865.