To say the least, Michigan property taxes can be very confusing, so this week we’re going to spend some time clarifying some of the questions that you may have about Michigan property taxes.
How Are Property Taxes Determined?
Property taxes are assessed based upon the value of your property. Each municipality has a tax assessing department and this department will send you a tax assessment every year. The assessment will list two numbers that you need to pay attention to: your State Equalized Value (SEV) and your Taxable Value.
Your SEV is equal to 1/2 of the retail market value of your property. So, for instance, if your property has a retail market value of $60,000, then your SEV will be $30,000. You may not agree with the assessment that the local tax assessor makes, and we’ll talk about that more in a moment.
Your taxable value is the amount that you will be taxed on. When you first buy a property, your taxable value and your SEV will be the same. As time goes on, and your property appreciates, your SEV will increase. However, your taxable value is limited from increasing too much too fast. In Michigan there is a law that states that your taxable value can only increase by the rate of inflation up to a maximum of 5%. So, if your property appreciates more than this, your SEV will go up more than your taxable value. The good news is that you pay taxes based upon the property’s taxable value. This law was enacted to protect people from being taxed out of their homes.
Important Property Tax Dates
So how do property taxes work in Michigan? Well, each year you will be issued a tax assessment for your property and you will have to pay your property taxes in the summer and winter. The dates when each of these activities take place vary by municipality, but the table below gives you a general idea about when to expect them.
Normally sent between January – March
|Bill Sent||Taxes Due|
May – July
|August – October|
October – December
|January – March|
Are Summer and Winter Tax Bills the Same?
The simple answer is no. Again, this varies by municipality, but typically the summer tax bill is much higher than the winter tax bill. For instance, if your taxes are $2,000 for the year, it would not be uncommon for the summer tax bill to be $1700 and the winter tax bill to be $300.
As I tell all of my clients, you’ll want to determine what your full-year taxes are and set aside money each month so that the money is available to pay the taxes as they come due.
How Can I Determine Property Tax Rates
The Michigan Property Tax Estimator is a website you can use to estimate the taxes on a property you are looking to purchase, or estimate the taxes on a property you own. If you are looking at a property to purchase you will need to know the following information:
- County the property resides in
- City the property resides in
- School district the property is in
Now, you will be given two tax rates: homestead and non-homestead. The homestead tax rate applies if the property is your primary residence. Obviously this is not the case for rental properties, so the non-homestead tax rate will apply. Unfortunately the non-homestead tax rate is always higher than the homestead rate.
Now, if you already own the property you will need all the same information as above, but you will replace the SEV with the taxable value in the calculator.
What if I Don’t Agree With My Property Tax Assessment?
In Michigan there is an appeal process that you can go through to fight your property taxes. In the process you will have to prove your case by showing that properties in the area are not selling for the assessed value that you property has been given. Fighting your taxes can be an excellent way to reduce the expenses on your property and because taxes can only increase by 5% per year, you stand to have lower tax rates for quite some time after you win your case.
Now, there is a process to fighting your taxes, and if you are an out-of-town investor I would recommend you get an attorney involved that specializes in fighting property taxes. Typically I’ve seen attorneys charge around $500-$1000 for this service, and they normally guarantee a reduction if they take your case. Now, if you plan to keep the property for a number of years, you can certainly make back the attorney fees in the tax savings you will see. If you would like a referral to an attorney that specializes in fighting property taxes please contact us.
Again, I know this can be very confusing, and if you have additional questions on property taxes, I would be happy to help you with this. Please feel free to email us or give us a call (248)917-4416.