Property Tax Exemptions You're Probably Not Claiming in Michigan

Michigan's homestead exemption doesn't cover your whole tax bill, just one specific slice of it. The bigger protection, the one that actually keeps long-term owners' bills from spiking, resets completely the moment a home changes hands, which matters a lot if you're the one buying it.

The exemption that covers less than people assume

The Principal Residence Exemption (PRE), what most people still call the homestead exemption, exempts your primary residence from the 18 mills that local school districts levy for operating purposes. It doesn't touch county, city, or other school-related taxes, just that one specific piece. Depending on your local millage rate, this can still add up to a meaningful yearly savings, but it's a slice of the bill, not the whole thing. File the PRE affidavit with your local township or city assessor; it's a one-time filing that stays in place unless ownership changes.

The cap that resets the moment you buy

Under Proposal A, a home's taxable value, the number your bill is actually calculated from, can only rise each year by the rate of inflation or 5%, whichever is lower. For 2026, that cap works out to 2.7%. This applies automatically to every homestead in the state, not just seniors or a specific group, and it's why a home that's been owned for a decade can have a taxable value far below what it would sell for today.

Here's the part that matters most if you're buying: this cap uncaps the year after a sale. Your home's taxable value resets to match its current assessed value, regardless of what the seller had been paying. If you looked at the seller's property tax bill and assumed that number would be yours, it won't be. Your own bill starts fresh, based on the home's value now, not the capped number the seller had built up over years of ownership.

The one for disabled veterans, and a recent fix worth knowing about

Veterans with a 100% permanent and total service-connected disability rating, or those rated at the 100% compensation level under Individual Unemployability, receive a full property tax exemption on their primary residence, not a dollar figure or a percentage, all of it. There's no income limit. Surviving spouses generally retain the exemption. As of January 1, 2025, this exemption auto-renews once approved, ending the old requirement to reapply every single year, a change that had reportedly caused some veterans to lose the benefit simply because paperwork lapsed.

A few more worth knowing about

Townships and cities can grant a Poverty Exemption to income-qualifying homeowners, but it's a local option, not guaranteed statewide, and it requires new documentation at your local Board of Review every year. Separately, the Homestead Property Tax Credit isn't a property tax filing at all; it's a credit claimed on your state income tax return (Form MI-1040CR), worth up to roughly $1,500 to $1,800 depending on your situation, with seniors receiving a notably more generous formula than other filers. And low-income seniors 62 and older can defer their summer tax bill interest-free until mid-February through their local treasurer, a genuinely better deal than the interest-bearing deferrals some other states offer.

What to actually check

Confirm the PRE affidavit is filed after you buy; it isn't automatic at closing. Don't budget your future tax bill off the seller's current number, since Proposal A's cap resets when you take ownership. And if you're a veteran with a 100% rating, confirm you're benefiting from the 2025 auto-renewal change rather than still tracking an annual reapplication that no longer applies.