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
