Michigan Property Taxes Change After Buying a House - Cheryl Clossick

Many people take the time to check what the property taxes are on a house before they buy a new home. However, many people don't realize that Michigan property taxes change after a house sells. This is especially important now. Home values are up 19%-27% since 2019, in spite of the 2.5% decrease in value over the last year, so property taxes are higher than ever. Changes in Michigan property taxes can be confusing, so today we are going to demystify Michigan property taxes to help take some of the stress and confusion out of buying a home.

3 Values in a Property Tax Assessment

State Equalized Value (SEV): 50% of the assessor's estimate of the true cash value of the home as of December 31st of the prior year
Capped Value: Last year's Taxable Value multiplied by the lesser of the inflation rate or 5%
Taxable Value: The lesser of the SEV or Capped Value

In 1994, Michigan passed the Headlee Amendment which limits tax increases during periods of rapid appreciation in order to help keep people on fixed incomes from being taxed out of their homes by creating the Capped Value. In the last ten years, property values, and consequently SEVs, rose by 143%, but Capped Values for people who didn't move in that time frame only rose 19%. This means that the longer someone is in their home, essentially the less they have to pay in property taxes. Therefore, if a seller has been in their home for 10+ years, you can definitely expect a big jump in the Michigan property taxes after you buy it.

Why is that?

When a home sells, the Capped Value and Taxable Value that the sellers enjoyed go away, and on January 1st the current SEV for that neighborhood becomes the new Taxable Value. Note that it is based on the neighborhood SEV and not necessarily what you bought the home for. So whether you got a good deal because of a motivated seller, or got into a bidding war and paid over market value, your Michigan property taxes will most likely be the same.

There are a couple of exceptions though

If the SEV is greater than 50% of the sale price (may be the case on a fixer-upper, but not necessarily)
You can show that what you paid is the market/true cash value

So when you get your reassessment be sure to look at the SEV and see if it is accurate and if either of the above exceptions are true, contact the assessor's office and provide them with the necessary documentation.

Find Out Your Estimated Property Tax Value

If you are curious about what an estimate of your new property taxes will be before you purchase a home, you can use the Estimated Michigan Property Tax Calculator and fill in the required information. Just be sure that you enter the SEV (50% of the value) and not the actual value or you will get sticker shock. LOL