A few facts to help understand Michigan tax laws
By Hal Manning, TWP Assessor
Every year, starting around December and continuing through February, I get phone calls from folks with questions about tax bill amounts. The questions vary but a great portion of the callers are concerned because their tax bills are higher than their neighbors or relatives who own more land and perhaps have a larger or better home. They perceive that to be unfair. The system can and does work that way.
Under the current tax laws, two identical houses sitting side-by-side on identical lots may have drastically different tax bill amounts. This is because tax bills in Michigan are now based on three things: (1) the value of the property, (2) how long you have owned it, and (3) whether or not you have a homestead exemption. These three things will interact and cause wide fluctuations in the property tax amounts.
Obviously, expensive homes should have higher tax bills than modest homes, and that's usually the case. At least, it starts out that way. However, the current tax system protects owners by holding down annual tax bill increases for as long as they hold title. The mechanics of this are beyond the scope of this message but the tax system is designed to limit annual tax bill increases to 5% or cost-of-living (whichever is lower). This is not limited to homeowners, it applies to all real estate parcels, commercial, industrial, residential and even vacant properties. However, once a parcel changes ownership, that protection stops for the following year, then starts all over for the new owner.
In short, if you buy a home, you should expect a higher tax bill than the previous owner paid. What confuses most people is the "time frame". The usual selling season is the summer and the new owners receive a tax bill in December. BUT.. That the first December tax bill is still based on the previous owners taxable value and may even include the previous owners homestead exemption (if it was a homestead on January 1st - it's a homestead for the whole year - that's one of the rules). It's not until the December of the following year that the new owner gets "his or her" tax bill. That's when "sticker shock" happens.
Some people perceive this system to be unfair to new buyers. At least, the new buyers seem to have that perception. But, that's not really the case. The new owners will actually be paying the same as they would have under our old system. The only thing different is that the sellers have been protected from the large increases that we all used to endure every year. If not for that protection, the old owners would have been paying higher bills all along and the new owners would take over at roughly the same level.
By the way, on the homestead exemption... Michigan residents may claim that exemption on their one "principal residence". May 1st is the qualifying day and the last day to file the form. The exemption eliminates the "school operating" tax from your bill. Depending on the school district, this may amount to a 40% or so reduction. Affidavits for exemption are available at the Township hall. The exemption may also be extended to any vacant lots if they are adjacent to your home.
Some of our out-of-state property owners with vacation homes feel that our homestead exemption treats them unfairly because they can't claim it. Please try not to feel that way...Michigan residents can't claim a homestead exemption on a 2nd home either. And, we got that exemption, in part, in exchange for a higher sales tax. Generally, "out of staters" don't pay our sales tax. You might pay an equal or higher tax in your own state but Michigan doesn't get that revenue. To be sure, some occasional items are bought here but most will be bought at home-including the large purchases like automobiles and appliances.
How to estimate your tax bill from an assessment notice
Assessment notices contain information needed to get an idea of your upcoming tax bills. On the notice, find the current years "taxable value", then put a decimal 3 places from the right side. example: if taxable value is 30500, use 30.5. Then, if the property is a homestead, multiply 30.5 times 30 to get an approximate tax bill of $915. If the property is not homestead, multiply the 30..5 times 48 to get an approximate tax bill of $1464. Township residents get only one tax bill annually. Village people can look forward to a July bill in addition to the winter bill. The village July bills can be estimated using the same example: 30.5 times 21 = $640.50