Property Taxes – New in Michigan
Michigan Property Taxes
In Michigan, the value of your real property is assessed by the local municipal assessor. This State Equalized Value is 50% of the value of the property.
Prior to 1994, the taxable value of your property went up and down on a yearly basis depending upon the increase or decrease in value of the home and/or the neighborhood.
The biggest problem was created for individuals who held their property for many years. While their property remained as is, others near-by could build new homes or greatly remodel the home so that the value of the neighborhood went up dramatically. This was especially true with waterfront homes. In more underdeveloped areas, cottages were eventually replaced with very large homes. As the values around the lake went skyrocketing, so too did the tax bill for the small cottage that remained unchanged. Many individuals were faced with selling the property because they could no longer afford the property taxes.
In 1994, the voters of Michigan approved Proposal “A”. This capped the amount that property taxes could increase on an annual basis. Therefore, the property tax upon a parcel of real property cannot increase more than 5% per year.
This leads to two separate values for a parcel of real estate: the state equalized value (actual value) and the taxable value. For parcels held on a very long term basis, the difference between the two values can be dramatic.
The property taxes are uncapped (or pop-up) upon the sale or transfer of the property by the owners. This included the transfer of property by gift or at death to children or siblings.
Often long held farms or family cottages which the owners wanted to pass down to their children had to be sold after the children found an increase in taxes of up to three or four times what their parents had been paying.
Effective December 31, 2013, this has changed. Now, the transfer of property by the original owners to individuals who are children, parents or siblings, will not uncap the property taxes.