Travis Bunn

Founder, AppealDesk · Published March 27, 2026 · Updated August 2, 2026

Michigan Uncaps Property Taxes the Year After You Inherit a Home, Unless the Family Exemption Applies

Updated August 2026

Michigan is one of the few states where inheriting a house can, by itself, rewrite the property tax bill. The reason is Proposal A of 1994. While one owner holds a property, its taxable value can only grow by the inflation rate or 5 percent per year, whichever is less. A transfer of ownership breaks that cap: under MCL 211.27a(3), the taxable value for the calendar year following the transfer resets to the state equalized value, which is 50 percent of the property's true cash value. Assessors call this uncapping.

If your parents bought the house decades ago, the gap between its capped taxable value and its state equalized value can be enormous, and the tax jump after uncapping lands on you, the heir. But Michigan also wrote a specific escape hatch for families, added a mandatory affidavit with real penalties for skipping it, and kept a normal appeal path open when the new number is simply wrong. This guide walks through each piece in the order you will actually meet it.

What Uncapping Actually Changes

Michigan taxes are computed on taxable value, not on assessed value. Every parcel carries both numbers. The state equalized value tracks half of true cash value and moves with the market. The taxable value started at the same place when the current owner acquired the property, but since then its annual growth has been limited to the lesser of 5 percent or the inflation rate, plus adjustments for physical additions and losses. In a market that appreciated faster than inflation, the two numbers drift apart, year after year, for as long as ownership does not change.

Suppose, as a purely hypothetical illustration, a Michigan house has a state equalized value of $100,000 but a taxable value of $55,000 after decades of capped growth. The owner dies and a non-exempt heir takes title. The following calendar year, the taxable value resets to the SEV, and every mill levied now applies to roughly $45,000 more value than it did the year before. Nothing about the house changed. Only the ownership did.

One consolation: uncapping is a one-time reset, not a permanent loss of protection. Once the taxable value equals the SEV, Proposal A's cap resumes for the new owner, and the two values begin drifting apart again from the new base.

Inheriting Is a Transfer of Ownership Under Michigan Law

The State Tax Commission's Transfer of Ownership Guidelines are blunt about this: a conveyance of a deceased person's property, whether directed by a will or by a probate court under intestate succession, is a transfer of ownership. Title generally passes to devisees or heirs at the time of death, and the uncapping follows in the next calendar year.

Two timing details matter for estates:

• The spouse exception. A conveyance to the decedent's spouse is not a transfer of ownership at all under MCL 211.27a(6). A surviving spouse keeps the capped taxable value.
• The dominion rule. If probate drags on and an heir starts exercising control over the property before formal distribution, occupying it, collecting rent, and so on, the State Tax Commission treats the transfer as occurring when that dominion began, not when the deed finally records. A slow estate does not postpone uncapping if someone is already living in the house.

Joint tenancy and life estate situations follow their own rules. Michigan courts have held that the death of a joint tenant is not itself a conveyance in some configurations, and a retained life estate generally delays the transfer until the life tenant dies. If the deed involved either arrangement, get the specific facts in front of the assessor or an attorney before assuming the value will or will not uncap.

MCL 211.27a(7)(u): The Close Family Exemption That Keeps the Cap

Since December 31, 2014, Michigan law has exempted a transfer of residential real property from uncapping when the transferee is the transferor's, or the transferor's spouse's:

• mother or father
• brother or sister
• son or daughter, including adopted children
• grandson or granddaughter

The single ongoing condition: the property must not be used for any commercial purpose following the conveyance. Keep it as a residence, whether you live in it or a family member does, and the parent's capped taxable value carries over to you. Convert it to a commercial use and the exemption is gone. The statute also gives teeth to the paperwork: on request from the assessor or the Department of Treasury, you must furnish proof of the qualifying relationship within 30 days, and a false claim carries a $200 fine.

Three practical points heirs miss:

• It is not automatic. The assessor learns the relationship from the Property Transfer Affidavit you file. Leave the exemption unclaimed and the default outcome is uncapping.
• Renting to a tenant is a gray area you should clear with the assessor. The statutory test is commercial use, and assessors apply it to the facts. Ask in writing before you list the house for rent.
• Related provisions extend the same relative list to terminations of life estates on residential property and to certain trust distributions, per the State Tax Commission's current guidelines. Inheriting through a revocable trust does not automatically forfeit the exemption, but the trust language matters, so bring the document to the assessor or an attorney.

Note the earlier version of this law, in effect during 2013 and 2014, covered only first-degree relatives. If an assessor uncapped a sibling or grandchild transfer that happened before December 31, 2014, that may have been correct under the old text. Timing of the transfer controls which version applies.

Form 2766, the 45-Day Affidavit That Protects You Either Way

Whoever receives the property must file a Property Transfer Affidavit, Treasury Form 2766 (formerly L-4260), with the city or township assessor within 45 days of the transfer. MCL 211.27a(10) makes the filing mandatory, and it applies even when you are claiming the family exemption. In fact the affidavit is how you claim it: the form is where you disclose the relationship that keeps the cap in place, and assessors now routinely ask for supporting documents such as birth or marriage certificates.

Skipping the affidavit is expensive in two tiers:

• The filing penalty. For residential property, $5 per day after the 45-day deadline, capped at $200, payable to the local tax collecting unit.
• The delayed uncapping. This is the real danger. If the assessor discovers an unreported transfer years later, the law requires uncapping retroactively to the year after the transfer, recalculating every subsequent year, and billing the additional taxes with interest and penalties running from the dates the taxes would originally have been due. The State Tax Commission is explicit that there is no limit on the number of back years when the cause was a transferee's failure to file.

If you receive a delayed uncapping notice, MCL 211.27b gives you 35 days to appeal to the Michigan Tax Tribunal, but the appeal is limited to whether a transfer of ownership actually occurred and to arithmetic errors. You cannot argue value in that proceeding. File the affidavit on time and you never face this trap.

The Principal Residence Exemption Does Not Ride Along With the House

Separate from the taxable value cap, Michigan exempts an owner-occupied principal residence from up to 18 mills of local school operating tax. That Principal Residence Exemption belonged to the person who died, and it does not transfer to you.

• If you move in, file Form 2368, the PRE Affidavit, with the assessor. Deadlines are June 1 for the summer levy and November 1 for the winter levy. Miss both and you can petition the Board of Review, which can grant the exemption for the year claimed and up to three prior years where you qualified.
• If the house sits empty while the estate sells it, ask the assessor about a conditional rescission, Form 4640, which can preserve an existing PRE for up to three years on a property that is for sale, not leased, and not used commercially.
• If you rent it out, the PRE must come off, using Form 2602. Keeping an exemption you no longer qualify for invites a denial covering the current year plus three back years, with interest.

On a house with an 18-mill PRE at stake, every $100,000 of taxable value is $1,800 per year of school operating tax. Whether the inherited home keeps that exemption is often worth as much as the uncapping question itself.

Several Heirs, One House: How Michigan Handles Fractional Shares

Estates rarely leave a house to exactly one person. When siblings take title together as tenants in common, Michigan's partial uncapping rules come into play, and they interact with the family exemption in ways worth planning around.

Partial uncapping follows the fraction transferred

The State Tax Commission's guidelines treat a transfer of an undivided fractional interest as a partial transfer of ownership. If a one-third tenancy in common interest transfers in a way that is not exempt, the following year's taxable value is computed as one third of the state equalized value plus two thirds of the capped value. Tenancy in common is one of only a handful of situations where Michigan permits a partial uncapping at all; most non-exempt transfers uncap the entire parcel.

Sibling buyouts can stay capped

Here is where the family exemption earns its keep a second time. Because MCL 211.27a(7)(u) covers transfers between brothers and sisters, a later buyout, where one sibling purchases the others' inherited shares of the residential property, can also be exempt from uncapping, provided the house is not being used for any commercial purpose. The exemption does not depend on the transfer being a gift; it depends on the relationship and the residential use. Each buyout still needs its own Property Transfer Affidavit documenting the sibling relationship.

Contrast that with selling a share to a co-heir's spouse, a cousin, or an outside investor: those transfers fall outside the statutory relative list, and the corresponding fraction of the taxable value uncaps the following year.

The First-Year Calendar for a Michigan Heir

The deadlines that decide the tax outcome are concentrated in the first year or so after death:

• Within 45 days of the transfer: file Form 2766 with the city or township assessor, claiming the MCL 211.27a(7)(u) exemption on the form if a listed relative is taking the property.
• June 1 or November 1: if you are moving in, file the Form 2368 PRE Affidavit by whichever deadline comes first after you occupy the home. If the house will be sold, ask about conditional rescission Form 4640 instead.
• Late winter: watch for the assessment change notice, which MCL 211.24c requires at least 14 days before the March Board of Review. This is where an uncapping first appears in writing.
• Week beginning the second Monday in March: Board of Review protest sessions under MCL 211.30, the required first stop if the new state equalized value overstates the home's true cash value, or if the assessor uncapped a transfer that qualified for the family exemption.
• Within 35 days of any delayed uncapping or PRE denial notice: appeal to the Michigan Tax Tribunal.

There Is No Michigan Inheritance Tax on Top of This

Michigan's inheritance tax applies only to inheritances from people who died on or before September 30, 1993, per the Department of Treasury. The state estate tax that replaced it was a pickup tax tied to a federal credit that Congress phased out, so it has collected nothing on deaths in the modern era. For a current Michigan inheritance, the state levies no death tax at all.

Do not let that lull you, though. The absence of a death tax is exactly why the property tax mechanics above are the entire state-tax story for most Michigan estates, and why an avoidable uncapping is often the single largest tax mistake an heir can make here.

When the Uncapped Number Itself Is Wrong: The March Board of Review

Uncapping sets taxable value equal to state equalized value, which makes the assessor's opinion of true cash value suddenly decisive. The State Tax Commission warns assessors that they may not simply chase sale prices, and the same logic protects heirs: the SEV must reflect what the property would actually bring, in its actual condition. Inherited homes are frequently dated, deferred-maintenance properties that the record card still describes in better condition than reality.

Suppose a hypothetical heir in Genesee County inherits a house the assessor now carries at a true cash value of $201,000, roughly the statewide median, for an SEV of $100,500. If the roof, furnace, and kitchen date to the 1990s and similar unrenovated houses on the block have been selling near $170,000, the SEV supported by the evidence is about $85,000. At a typical Michigan effective tax rate near 1.38 percent of market value, that gap is worth several hundred dollars every year, compounding forward because the corrected value becomes the new capped base.

The path, cross-referenced in our Michigan property tax appeal guide:

• Your assessment change notice must arrive at least 14 days before the March Board of Review under MCL 211.24c. Read it the day it arrives; the uncapping will show as a large taxable value increase.
• Many assessing offices offer an informal review first. Bring comparable sales and photos of condition issues.
• The Board of Review holds protest sessions during the week beginning the second Monday in March, with sessions possibly continuing through March 31, under MCL 211.30. For residential property, protesting here is the required first step.
• If the Board denies relief, you can continue to the Michigan Tax Tribunal, and from there to the Court of Appeals.

The bottom line for Michigan heirs is that almost every dollar at stake is decided by paperwork and calendar, not by negotiation. The family exemption, the affidavit, the PRE filings, and the March protest each have a form and a deadline. Handle those four, and the tax bill on an inherited Michigan home is usually either unchanged or defensible. Miss them, and the state's default machinery, uncapping plus retroactive billing, runs on its own.

Frequently Asked Questions