Taxable values began in 1995 as part of Proposal A. Taxable values are adjusted each year by the Consumer Price Index (CPI) or 5% whichever is less until property title transfers. Your taxable value cannot be greater than your state equalized value. In other words, Proposal A “capped” taxable value increases by the CPI or 5%, whichever is less.
Yes it can, if:
- A sale and/or title transfer occurs. In the year following a sale and/or title transfer, the property becomes “uncapped” making the state equalized value (SEV) and taxable value the same. Michigan law states the actual sale price must not be the sole basis for the new SEV for that property.New construction to a property is added to the taxable value.
- The value of items omitted from the previous year(s) assessed value is added to the taxable value.
The Michigan Constitution still requires all properties to be assessed annually at 50% of market value.
Assessors use a state required mass appraisal method to value properties. Estimated land values are obtained from sales data and building values from a state cost manual. Analysis of sales data from various neighborhoods is done to develop factors that are used to further refine the valuations to reflect local market value.
Your market value can change even when there is no physical change to your property. A growing economy or increasing population can push housing values steadily upward. The Assessor does not create increases in property value. He/she recognizes changes as they occur and must adjust values accordingly.
Assessed value changes vary according to the individual characteristics of houses in relation to sales in your area. Building style, size and amenities such as porches, decks, garages, and extra bathrooms affect value estimates.
The current sales information for your neighborhood may show no value increase over last year’s value. However, the taxable value is tied to the Consumer Price Index and calculated annually causing an increase in your taxable value.
Compare the market value of your property with sales of similar homes in your neighborhood. The sales should be on homes that are similar to yours in size, style, age and condition.
Michigan law prohibits assessors from basing values on one sale price. Assessor’s are required to value your property based on the methods used to value other properties in your area. While it is the intent that the assessment be close to the sale price, it is an estimate and may not be the same as your recent sale.
First, you should talk to your local assessor about the valuation he/she has placed on your property. Review with the assessor the facts about your property to make sure the data used to develop the valuation is correct. If you still disagree with the assessed value you may appeal to the March Board of Review. Your annual notice of Assessment Change (usually mailed late February or earlier March) should provide dates and times for the March Board of Review hearings. This step preserves your appeal rights for further action at the Michigan Tax Tribunal.
Contact your township assessor:
Changes in state law after Proposal A of 1994 created the property transfer affidavit. An affidavit must be filed whenever title of real estate or buildings on leased land is transferred. It must be filed even if you are not recording a deed. Filing with the local assessor is mandatory.
Property transfer affidavits can be obtained from closing agents such as a title office, financial institution or attorney. They can also be obtained at your local assessor’s office. The new owner must file the affidavit with the local assessor within 45 days of the transfer.
Assessors use the affidavit to make sure that property is assessed properly and receives the correct taxable value.
State law defines a “transfer of ownership” as “the conveyance of title to or present interest in property, including the beneficial use of the property.” Transfers include deeds, land contracts, and a variety of transactions outlined on the back of the affidavit form.
The Michigan Constitution limits how much a property’s taxable value can increase while owned by the same person. Once the property is transferred, the assessor must change the taxable value to 50% of the property’s usual selling price. In other words, in the year following the sale the taxable value equals the current state equalized value.
Yes. Some of the exempt transactions include changes in ownership solely to exclude or include a spouse, transferring a property into a trust where the sole beneficiary is the creator of the trust or that person’s spouse, redemption from a tax sale, or transfer to effect a foreclosure. Some of the exempt transactions are listed on the affidavit form and full descriptions are in MCL Section 211.27a(7)(a-p).
State law grants a Principal Residence Exemption or a Qualified Agricultural Exemption from some local school operating taxes for a taxpayers principal residence (PRE’s) or for Qualified Agricultural properties (Qual. Ag.’s). Currently this is a reduction of up to 18 mills of school operating tax.
To qualify you must own the property and occupy it as your legal, primary residence. The deadline to qualify for any given year is May 1 of that year. Buyers who close and/or occupy the residence after that date are eligible for exemption in the following year.
If this is your first principal residence application or you are buying a property that was not previously exempted, you can use the Affidavit for Homestead Exemption (2368). Homestead forms are available at the Assessor’s Office (Form 2368).
If you stop using your exempt property as your principal residence but are not selling it, you are required to file a Request to Rescind Homestead Exemption (2602). This form must be filed within 90 days of the change. The exemption remains in effect through December 31 of that year. (Form 2602)
You need to rescind the Principal Residence Exemption on the house you sold and request a Principal Residence Exemption on your new house. Use a Request to Rescind Homestead Exemption (2602) form to rescind your old exemption and the Affidavit for Homestead Exemption (2368) form for your new Principal Residence Exemption.
Public Act 260 of 2000 was enacted in an attempt to preserve farmland by offering an incentive to keep property in qualified agricultural use. Under the act, qualifying transfers are exempt from uncapping as long as the property remains qualified agricultural property after the transfer and the person to whom the property is transferred files the prescribed affidavit with the assessor and the register of deeds. The signer of the affidavit attests that the property will remain qualified agricultural property following the transfer.
However, what happens when property which has been exempt from uncapping under the provisions of Public Act 260 later ceases to be used as qualified agricultural property? Understanding the answer may help in determining whether filing the affidavit is beneficial or not, depending on the transferee’s planned future use of the property.
When qualified agricultural property, which has been exempt from uncapping, ceases to be qualified agricultural property because of a change in use, the act requires the taxable value of the property to be uncapped in the calendar year following the change of use – meaning that the state equalized value of the property becomes the taxable value for that year. This provision applies to the entire parcel even if only a portion of the property ceases to be used for a qualified agricultural purpose.
The property also becomes subject to Public Act 261 of 2000 (Agricultural Property Recapture Act) and the imposition of a recapture tax. This tax is calculated and collected by the County Treasurer on the period in which the benefit was received consisting of the most recent seven years of tax savings (excluding the year in which the change in use occurred). The amount of the tax will be equal to the difference in taxes paid during the benefit period which were calculated on the capped taxable value and those which would have been due had the taxable value uncapped the year following the transfer.
Prospective purchasers of qualified agricultural property currently receiving this benefit, who plan on converting the property to another use following the transfer of ownership, should file form 3677 (The Notice of Intent to Rescind the Qualified Agricultural Property Exemption), and provide a copy to the prospective seller prior to the purchase. Filing of the form with the local tax collecting unit will effect a change in use and subject the property to the imposition of the recapture tax at the time the instrument transferring the property is recorded with the register of deeds. Payment of the recapture tax at that time would be the obligation of the seller.
In short, the amount of tax relief to be expected will be directly related to the duration of time the property remains in qualified agricultural use following its transfer. Because the recapture tax is limited to the most recent seven years in which the benefit was received qualified agricultural property which remains in use as qualified agricultural property for more than seven years following a transfer will benefit from property tax savings as a result of Public Act 260. Short of that however, the act offers not much more than a property tax deferment. Ultimately, prospective purchasers or transferees will need to consider their long term land use plans when determining how much benefit is to be realized from this act.
Although the taxing agencies on your bills may have different fiscal years, your bills are for the calendar year in which they are billed. Add your July and December tax bills together for your total annual taxes.
Taxes are computed by multiplying your taxable value times the total mills. A mill is $1.00 per thousand dollars of taxable value. An easy formula to calculate taxes is shown below:
Remember, a property with a PRE exemption is exempt from up to 18 mills of school operating taxes!
Taxes can increase because:
- The tax rate increased. Periodically, voters have an opportunity to renew or approve increases to tax rates at special elections. If voters approve additional millage, your taxes will increase.
- Your taxable value increased. Your taxable value may have increased because (a) it was adjusted by the annual Consumer Price Index, (b) it was uncapped after property ownership transferred, or (c) new construction or omitted items were added.
Property values are determined individually and differences in style, size, condition and amenities cause differences in assessed values. If you recently purchased your property, your taxable value was uncapped. Your neighbor’s taxable value may still be capped and less than yours. A lower taxable value means lower taxes.
Estimate your annual taxes by multiplying ½ of the estimated total value of the completed home times the tax rate. Be sure to add land value to your value estimate before computing your estimated taxes.
Michigan law requires everyone to support local public schools through property taxes. Eligible homeowners may be exempt for 18 mills of school operating taxes, but are still responsible for school debt, building funds and state education taxes.
Typically this happens about one year after you buy a new house. Your mortgage company probably based your original tax escrow payment on the last known taxes. After you purchased the property its taxable value was uncapped for the next tax year. The taxes were then based on a higher value. Once this happens, your mortgage company reevaluated your escrow amounts and changed your payment to cover the actual taxes on your home. They may also increase your payment to make up any shortfalls in the previous year.
If you need to find your property lines, you should contact a local surveyor to perform this service. Several are listed in the yellow pages of the phone books. We may be able to provide an assessment description and tax map to get you started, but we cannot survey or locate stakes on your property.
Contact an attorney for a new deed. If you are familiar with property transactions and feel comfortable preparing legal documents by yourself, deed forms are available at most office supply stores.
Copies of recorded deeds and land contracts can be obtained from the County Register of Deeds Office in the County the real estate is located.