Michigan Property Tax Explained
Taxes are calculated annually during the months of March and April.
The lesser or the State Equalized Value and the calculated value becomes that year's Taxable Value.
By state law, a home's assessed value is not half of its purchase price but half of its market value.
One mill equals 1/1000 of a dollar.
"Doubling the SEV" is the wrong way to determine property value. SEV estimates are based on a property's square footage without consideration for condition.
SEV figures are based on sales from January 1 to December 31 of the previous calendar year.
All assessed values are calculated according the State Tax Commission standards. This value is shown as the State Equalized Value or SEV on your tax statement.
Since the true market value of a property can only be determined when it sells, governments use a method known as assessment to assign value to a property. The Assessor estimates a home's value base upon its replication cost, age and the sale of similar homes in the same market.
State Equalized Value (SEV)
Once an Assessor has estimated the market value of a property, he is required to record 50% of that amount as the State Equalized Value. A home's State Equalized Value will change annually to reflect fluctuation of local property values. It will not increase radically unless major construction improves the property, or the property changes hands. Foreclosures and short sales are not used as comparisons.
Beginning in 1994 the State of Michigan adopted a plan to protect property owners from runaway inflation and escalating real estate values. Annual property tax is now based on the Taxable Value of a home.
Annual Taxable Value is calculated by multiplying the previous year's Taxable Value by the Consumer Price Index (CPI), but not to exceed 5%. Home improvements that add square footage to the home, such as addition of a room, or losses such as demolition of a garage are factored in.
While a home's SEV will fluctuate due to the sale of similar homes during the past twelve months, the Taxable Value increases with the rate of inflation.
Homestead and non-homestead tax rate
The State of Michigan allows a reduced Homestead tax rate for a property that is the primary residence of the owner. Second homes, commercial property and income properties are considered Non-homestead and are taxed at a higher rate. A difference of better than thirty percent.
Annual property tax
Property taxes are calculated by multiplying the Tax Rate by the Taxable Value.
Example: Homestead tax rate for the City of Lansing (45.9519), is multiplied by a property's Taxable Value of $21,789 (rounded to the next thousand - 22). Thus, 45.9519 X 22 = $1,010.
The property tax rate in Michigan is referred to as a millage, and it's figured in mills. One mill is equal to 1/1,000 of a dollar. Or, more simply, for every $1,000 in taxable value, a property owner will pay $1 in property tax. In the example above, the homeowner is charged $45.9519 for each $1000 of taxable value.