How to estimate your Michigan property taxes (step-by-step guide)

March 26, 2024
Shannon O'Sullivan

Understanding property taxes as a Washtenaw County buyer

Understanding how to estimate property taxes in Michigan is crucial for homeowners and potential home buyers alike. The process might seem complex at first, with various values and rates to consider, such as the property's taxable value, assessed value, and the local millage rate. However, with the right knowledge and tools, calculating your anticipated property tax bill can be straightforward. This article aims to demystify the process, explaining how Michigan property taxes work, how to calculate them, and what factors may cause them to change over time.

How To Calculate Property Tax

To calculate property tax in Michigan, you’ll need to understand a few key terms and their values concerning your property. Start with your home's SEV and assess its value, which should be provided in your tax assessment notice. You can then determine your home's taxable value, which is the figure the property tax rate will apply to. Using an online property tax calculator can simplify this process, allowing you to enter these values along with your local millage rate to estimate your tax bill. I'm going to run you through a quick demonstration of using the State of Michigan's free property tax estimator. After that, I'll include a ton of helpful information so you can better understand what goes into determining your property tax after purchasing a new home.

Overview of Michigan Taxes

Michigan property tax is a significant consideration for homeowners in the state. These taxes are levied on both residential and commercial properties and are a primary source of revenue for local governments and municipalities. The amount each homeowner pays is determined by the taxable value of their property and the applicable millage rate set by various taxing entities. It's essential for homeowners to have a basic understanding of how these taxes are calculated and what impacts their annual tax bill.

The process to calculate your Michigan property tax begins with understanding the assessed value of your home, which is supposed to reflect its market value. This value is then adjusted to the taxable value, which is what the property tax rate is applied to. It's important to note that in Michigan, the rise in taxable value is capped annually, except in the year following a property transfer. This mechanism protects homeowners from sudden and steep increases in their property tax bills, but it also means that new homeowners often face a higher tax bill than the previous owner.

Step by Step Michigan Property Tax Estimator Walkthrough

First stop BS&A Online

First we need to go to the BS&A Online. Find the link in the left sidebar titled "Municipalities" and click that. You should be presented with a page that will allow you to select or search for your municipality. Select your municipality. This should bring you to your municipality's landing page. Once here, you will need to enter the address of the home you're considering purchasing. Press the search button and a listing of relevant search results will appear. Select the correct property and you'll see a financial breakdown like this:

A view of the BS&A financial dashboard
BS&A Online breakdown for a home in Dexter. I've removed some of the details to anonymize the data.

State Equalized Value (SEV), Taxable Value, Assessed Value; what does it all mean?

Now we're going to look for the State Equalized Value in order to estimate the future property tax of a soon-to-be-purchased home.

In the context of Michigan property taxes, terms like State Equalized Value (SEV), taxable value, and assessed value are fundamental concepts that every homeowner should understand. The assessed value is an annual estimate of your property’s market value as determined by the local assessor. The SEV is a modification of the assessed value, adjusted across the state to ensure fairness and equity. However, it's the taxable value, which is typically lower than the SEV due to limitations on annual increases, that your property tax rate is applied to.

This trifecta of values forms the backbone of how property taxes are calculated in Michigan. A firm grasp of these terms and their interplay can significantly benefit homeowners in planning and managing their tax liabilities. By comprehending these concepts, you can more accurately predict your annual property tax bill, engage in informed discussions with your assessor, and take advantage of any opportunities to appeal or reduce your taxable value.

For the next step in our property tax estimating journey we need to copy the State Equalized Value, which you'll find in the "General Information for Tax Year 2024" section. I've pointed it out in the image below:

A view of the BS&A dashboard with the State Equalized Value section of the dashboard highlighted

Next Stop, The State of Michigan Property Tax Estimator

Now we're going to head over to the Michigan Property Tax Estimator.

The Michigan Property Tax Estimator

Here you're going to click that "Begin Estimating Property Taxes" button and we're off to the races. You'll see a page like this with a number of filters to help you narrow down your County, your city/township/village, and the school district in question. Fill in that information and click the search button.

The search page of the Michigan Property Tax Estimator
The search page of the Michigan Property tax estimator with filters selected and the filters highlighted
Here's an example, I've filled out the dropdown filters for a City of Dexter search

Once you've searched, you should see a display with information like the county, the city/township/village, the school district, a recent homestead millage rate, and a recent non-homestead millage rate appear. You should also see a text input where you can paste the State Equalized Value that we saved from our earlier search in the BS&A online. Paste or type in the State Equalized Value and click the "Calculate" Button. I've got a photo below that shows you how it should look.

Once you've pressed "calculate" you should see results with your estimated future property taxes:

And that's all there is to it! You've now been able to get a look into one of the most perplexing costs of buying a new home. Pretty handy, right?

Now remember, these are just estimates. It's important to consult with a lender to more fully understand the financial implications of purchasing your new home.

But while we're here, I'm sure you have some questions about the number that you generated for your future property taxes. How do property taxes work? How are they calculated? Why do property taxes go up after you purchase a home? What is a mill? I've got these answers and more below, so if you're interested in learning more keep on going.

How Michigan Property Taxes Work

Property taxes in Michigan function through a system where local assessors determine your home's assessed value annually. This assessed value is ideally half of your home’s market value. Following this, the assessed value can then be adjusted to a figure known as the State Equalized Value (SEV), ensuring uniformity across the state. However, it is the home's taxable value that is ultimately used to calculate the property tax owed, and this figure is limited by Michigan law to increase by no more than 5% per year unless there is a change in ownership.

Every homeowner in Michigan should be familiar with the millage rate, as this rate significantly affects their property tax bill. A millage rate is the amount per $1,000 of property's taxable value that is used to calculate local taxes. Municipalities and local tax authorities set this rate, and it can vary widely across different areas. Understanding the millage rate in your area is a key step in accurately estimating your Michigan property taxes.

Washtenaw County

In Michigan, property taxes can vary significantly from one county to another, with Washtenaw County being one of the higher tax regions. If you own property or are considering purchasing a home in Washtenaw County, it's critical to comprehend how taxes are assessed here. The assessor will evaluate your property to determine its market value, which is then translated into an assessed value. Washtenaw County’s property tax rates and policies are specific to the region, making local knowledge essential for accurate tax estimation.

Additionally, understanding the interaction between your property’s assessed value, taxable value, and the millage rate in Washtenaw County will paint a clearer picture of your tax responsibilities. Given that these factors can fluctuate, staying informed about changes within your municipality is paramount. Engaging with local tax authorities or consulting with a tax professional can provide insights tailored to your specific situation in Washtenaw County, ensuring you are neither overpaying nor underprepared for your property tax bill.

How you affect your property taxes:

Many homeowners don’t realize the significant role they play in influencing their property taxes. From home improvements and renovations to appealing your property’s assessed value, actions you take can directly impact your tax bill. Understanding this can empower you to make informed decisions about your property that could potentially minimize your tax liability without sacrificing the improvements and enhancements vital to your home's value and your quality of life.

Moreover, staying engaged with the assessment process, actively participating in local government decisions regarding millage rates, and taking advantage of exemptions can potentially reduce your property tax bill. Every homeowner has the opportunity to influence their property taxes positively, whether through renovations that increase energy efficiency and may qualify for tax credits or by challenging assessments that seem out of line with the current market values.

Understanding Property Tax Assessment in Michigan

Michigan’s property tax assessment process is precise, aiming to ensure fairness and equity in the taxation of property. Annual assessments review your property’s market value to determine an assessed value, which is then adjusted to the SEV. This adjustment is vital in ensuring your property’s assessed value is on par with half of its market value, as required by Michigan law. These initial valuations are crucial as they directly impact the taxable value of your property, which is the basis for your tax bill.

It's important for Michigan homeowners to understand this process, as discrepancies in the assessed or taxable value can lead to significant discrepancies in tax obligations. Engaging with your local assessor, asking questions, and providing relevant information about your property can contribute to more accurate assessments. Additionally, staying informed about changes in tax laws and rates in Michigan will help you anticipate and understand fluctuations in your annual property tax bills.

What’s a Mill?

One term that often confuses Michigan homeowners in discussions about property taxes is "mill." Simply put, one mill is equal to one dollar in tax for every $1,000 of a property's taxable value. This unit of measurement is critical in calculating property taxes, as it directly influences the amount homeowners are required to pay. By understanding how millage rates are determined and applied, you can better grasp the factors driving your property tax bill and find strategies to potentially mitigate these expenses.

The millage rate in your area is set by local school districts, municipalities, and other taxing authorities. It’s determined by the financial needs of these entities, which means it can fluctuate over time. Being aware of how these rates are set, and what they fund, allows you as a homeowner to be more informed about where your property tax dollars are going. This knowledge not only aids in planning and budgeting for your tax liabilities but also provides you with a voice in local tax rate discussions.

Why Property Taxes go up after Buying a Home

Many new homeowners in Michigan experience sticker shock when their first property tax bill arrives, often higher than what the previous owner paid. This increase can be attributed primarily to the uncapping of the property's taxable value at the time of transfer. When a property changes hands, its taxable value can be reset to its current market value, often resulting in a higher taxable base, and consequently, a higher tax bill. This underscores the importance of conducting thorough research and due diligence before purchasing a home, including understanding the potential future property tax obligations.

Furthermore, improvements and renovations by the new owner can also lead to increased property values, contributing to higher taxes. Being aware of how these factors can influence your property's taxable value, and thus your tax bill, empowers you to make more informed decisions regarding property investments and improvements. It’s essential for home buyers in Michigan to factor in these potential increases when budgeting for a new home, to avoid unexpected financial strains from future property tax bills.

How Much can Property Taxes Rise Each Year?

In Michigan, there are protections in place to prevent exorbitant increases in property taxes year over year. Specifically, the taxable value of a property cannot increase by more than 5% or the rate of inflation, whichever is lower, unless there is a change in ownership. This cap is designed to provide homeowners with some predictability in their tax obligations while still allowing for modest annual increases reflecting inflation and rising property values. Knowing this limit can help homeowners budget for the future, providing a measure of financial stability and planning.

However, it's also vital to remember that local millage rates, which can fluctuate based on the financial needs of municipalities and school districts, also play a crucial role in determining your final property tax bill. These rates can change annually, potentially impacting your taxes regardless of the cap on taxable value increases. Staying informed about local government decisions and budgetary needs can offer insights into potential changes in your property tax commitment, enabling more accurate financial planning and forecasting.

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