How to avoid property tax foreclosure

Thousands are still losing their homes to property tax foreclosure and it doesn’t have to happen to you.

Despite a new law that went into effect in January, 2015, too many homeowners are still losing their homes to property tax foreclosure. There are a number of steps a property owner can take to avoid this issue, especially if they are having trouble with delinquent taxes.

First, a homeowner should file a Principal Residence Exemption, PRE, with their local municipality. The home must be owner occupied and there are deadlines to file each year. Filing for this for exemption could lower the amount of your tax liability. Often, homeowners file for this exemption when they purchase the home but it isn’t required, it just makes good sense. In order to qualify for any other tax or payment reductions, you must first file the PRE form.

Next, check to see if you qualify for a Homestead Property Tax credit through the State of Michigan. If your total household income is less than $50,000 and your property value is less than $135,000 you may be able to claim this credit which could help you pay your property taxes. Here is a checklist you will need in order to prepare and file for this credit. Veterans or blind homeowners can qualify for a larger exemption through the State of Michigan. Seniors also have options to reduce their tax burdens beyond just the Homestead Tax credit but they aren’t automatically granted and must be applied for.

A homeowner may also apply for a poverty exemption or a hardship extension and if they meet eligibility requirements will be given extra time and or have their property taxes reduced. You will need to be able to show that you are the legal owner of the home by having a recorded Warranty Deed or Land Contract in your name. In addition, be prepared to provide proof of income and valid identification along with the completed form required by your city or township or county. Each city has its own form so contact your local tax authority to get started. The poverty exemption is good for one year and must be renewed annually in most municipalities. It’s good to find out specific filing deadlines and policies for your town.

If your property taxes are already past due, don’t wait to take action! Postponing putting a plan in place will add fees and penalties and you will end up paying extra on top of the normal tax bill. Your County Treasurer can set up a payment plan for homeowners to help them catch up but be prepared to begin making payments. The key is not to wait but to ask for help before you are at risk of losing your home.

In addition, if you have experienced a financial hardship, there may be help through the Michigan State Housing Development Agency’s Step Forward Michigan program which assists homeowners in catching up on delinquent property taxes. In addition, Michigan State University Extension has certified housing counselors who can assist you with the process. Contact a housing counselor near you by checking out our website.

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