If there are no additions or losses to the property, taxable-value increases are generally limited to the rate of inflation or 5 percent, whichever is less.
The taxable value cap does not apply following some transfers of ownership or changes in beneficial ownership.

Prior to Proposal A, property taxes were based on assessed value or state equalized value.

What is assessed value?

The Michigan Constitution requires all property to be uniformly assessed at no more than 50% of its True Cash Value (market value).

Each year, the local assessor determines the Assessed Value of each parcel of real property based on its condition as of December 31 (Tax Day) of the previous year.

What is state equalized value?

The state equalized value is the assessed value after county and state equalization.

The county board of commissioners and the Michigan State Tax Commission review assessments and make adjustments to ensure properties are assessed uniformly and do not exceed 50 percent of true cash value.

What is taxable value?

Taxable value is used to calculate your property taxes and is limited each year to the rate of inflation or 5 percent, whichever is less,
unless there are:

Additions or losses to the property, or
A transfer of ownership or change in beneficial ownership that causes the taxable value to uncap.

The taxable-value cap is removed following certain ownership changes. The new taxable value is based on the property's state equalized value.

What is capped value?

Capped value is used to determine the maximum allowable increase in taxable value.

The formula is:

Capped value = (prior year's taxable value − losses) × inflation rate multiplier + additions

The inflation rate multiplier represents the annual inflation adjustment and cannot exceed 5 percent.

The capped value limitation does not apply the year following certain transfers of ownership or changes in beneficial ownership.

How are property values determined?

Michigan assessors use qualified real property sales to compare assessed values with actual market values.

Market value is the most probable selling price of a property as of a specific date when:

The buyer and seller are knowledgeable,
Both parties are acting voluntarily, and
Neither party is under unusual pressure to buy or sell.

Assessors use sales studies to maintain assessments at approximately 50 percent of true cash value as required by the Michigan Constitution.

Can an assessor set the state equalized value or assessed value at the property's sales price?

No.

Michigan law does not allow an assessor to set a property's assessed value or state equalized value equal to the purchase price.

A property's sale price is not always the same as its true cash value due to factors such as:

An uninformed buyer or seller,
Insufficient marketing time,
Sales between related parties, or
Other unusual circumstances.

The purchase price alone is not considered the presumptive true cash value of the property.

What sales information is used to determine assessments?

Assessors use a 24-month sales study to help determine property assessments.

The sales-study period is established by the Michigan State Tax Commission and is used to analyze market conditions and maintain uniform assessments.

What happens when I purchase a property or there is a change in beneficial ownership?

When ownership or an interest in a property is transferred, including certain changes in beneficial ownership, the following year's taxable value generally becomes the property's state equalized value.

This process is commonly referred to as uncapping the taxable value.

After the year following the transfer, future taxable value increases are limited by the Proposal A cap, provided there are no additional transfers, additions, or losses.

However, certain transfers between qualifying family members may not cause uncapping under Michigan law.

A transfer of residential real property is not considered a transfer for uncapping purposes if the transferee is the transferor's or transferor's spouse's:

Mother or father,
Brother or sister,
Son or daughter,
Adopted son or adopted daughter,
Grandson or granddaughter,

and the residential property is not used for commercial purposes following the transfer.

How are property taxes calculated?

Property Taxes = (taxable value ÷ 1,000) × millage rate

Example:

Taxable value: $150,000
Millage rate: 40 mills

Property taxes = ($150,000 ÷ 1,000) × 40 = $6,000

Key terms to remember

Assessed value: Approximately 50 percent of a property's true cash value as determined by the local assessor.

State equalized value: Assessed value after county and state equalization.

Taxable value: The value used to calculate property taxes.

Capped value: The calculated limit on annual taxable value increases under Proposal A.

True cash value: The estimated market value of a property based on typical buying and selling conditions.