Getting a Michigan Transfer Tax Refund

If you bought a home from Fannie Mae or Freddie Mac, you may have agreed to pay the Michigan transfer tax. Check your settlement statement to see if this was one of the items charged to you. If so, it likely was a whopping expense. The tax is $8.60 for each $1,000 of the sales price. If, for example, you paid $300,000 for the home, you’d have paid a transfer tax of $2,580 (300 x $8.60 = $2,580).

How You Got Stuck with the Tax

The seller usually pays the transfer tax, but the seller and buyer can agree that the buyer will be responsible. The Fannie Mae and Freddie Mac sales contracts typically required the buyer to pay the transfer tax. This was based on the assumption that the sale was subject to the tax. A court decision has changed that assumption.

No Tax Was Owed

Federal law says that Fannie Mae and Freddie Mac must pay the same property taxes that everyone else pays – but not other state and local taxes. So is the transfer tax a property tax? The federal court of appeals has ruled that it’s not. This means that neither the seller nor the buyer owes any transfer tax when Fannie Mae or Freddie Mac sells a home. The result: If you paid the transfer tax, you can get a refund.

The Refund Process

Most of the transfer tax you paid went to the State of Michigan. The rest went to the county. You start the refund process by completing a standard form and sending it to the Michigan Department of Treasury. You’ll need to attach a copy of your Settlement Statement (HUD-1), and a copy of the recorded deed. Once the state refund gets processed, you can contact the county register of deeds to get a refund of the county’s portion of the tax.

The attorneys at the Ann Arbor law firm of Hamilton, London, & Davis can help you obtain the refund – and advise you about other property tax matters as well.