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Have a question about Michigan Tax Overages? Contact your trusted Michigan CPA, ATS Advisors.

What are Tax Overages? 

Tax “Overages” refers to the extra money that is left over when a foreclosed property is sold at a tax sale auction for more than the amount of back taxes owed on the property. Unlike mortgage auctions, the opening bid at a tax auction is usually the amount of unpaid taxes due on the property. (plus penalties, interest, and any associated costs for putting on the auction). If a property sells for more than the opening bid, then overages (surplus funds) will be generated. However, what most homeowners do not know is that many states do not allow counties to keep this extra money for themselves. Some state statutes dictate that excess funds can be claimed by a few parties – including the person who owed taxes on the property at the time of the sale.

Michigan Tax Overages?

On July 17, 2020, the Michigan Supreme Court issued an unanimous[1] decision, finding that the retention of surplus proceeds from a tax-foreclosure sale under the General Property Tax Act (“GPTA”) is an unconstitutional taking without just compensation under Article 10, § 2 of Michigan’s Constitution of 1963. Before the decision by the Court, Michigan was among a minority of states who permitted the retention of surplus proceeds from tax-foreclosure sales.  Property owners that have lost their property as a result of a tax foreclosure sale now have a claim against the county for the difference between the amount of taxes owed and the amount realized at the tax sale by the County.

Whats Next?

Michigan.gov states: Beginning with the 2021 foreclosure auctions, those who hold interest in property at the time of foreclosure, may file to claim leftover proceeds for parcels which sell for more than the owing delinquency.  Further details are available on Michigans Auctions and Claimants webpage.