Property taxes can be confusing, ever for those of us that deal with them everyday! Here’s a brief and simple breakdown of the process.
All homes are assessed by the city/township to determine their value. They do this by using sales trends in the area. It is usually a vague, but reasonably accurate figure for an average house in the subject area. For this purpose, lets say the municipality has decided your home is worth $100,000.
Your SEV or State Equalized Value is 50% of your assessed value, so in this demonstration your SEV would be $50,000. For this hypothetical lets say this is your first year at this house. In that case, your taxable value would also be $50,000 (we’ll get more into taxable value in a moment).
So now that we have your taxable value, which is the actual value they tax you on, lets talk dollars and cents.
Each city determines (and we vote on) a millage rate. This rate includes monies for the schools, monies for the city, for the county, etc. Each school district with-in a city will have a separate millage rate, and there is also a separate millage rate for principal residences vs. second/investment homes (non principal residences).
Now, Your millage rate is the dollars per thousand you pay in property taxes off of your taxable value. Lets say your millage rate is 25 and calculate your yearly taxes.
$50,000 (taxable value) / $1000 = 50
50 x 25 (millage rate) = $1250
You can view millage rates on Oakland County’s website at:
Here’s where things get a little tricky. In Michigan, we are on a “cap rate” type of system. The city/county can only raise your taxable value by the inflation rate NOT the actual increased value of the house. So if values in the area went up 20%, but the inflation rate for that year was 1.016, they can not raise you any more than 1.016. You’re SEV will still go up the full amount, but your taxable will only go up the rate of inflation. This is where your SEV and Taxable begin to not match up. However, anytime there is a deed transfer, the cap is removed and the properties value is reassessed. So here is a scenario.
Its now your 2nd year in your house. Home values have been going up, now your house is valued at $120,000!! The tax assessment you get in the mail will read an SEV of $60,000, but the inflation rate multiplier this year is 1.016, so your taxable value reads $50,800 and you are only taxed on that $50,800. Now, if you had made any additions to your property that year they can adjust your taxable in excess of the inflation rate, for the addition only, it will not reset your whole SEV.
For more details on the inflation rate multiplier from the State of Michigan click here
Appealing your Taxes
During our most recent recession, tax appeals were much needed. The municipalities were not keeping up with the rapid decline of home values, and many people were grossly over assessed and needed to appeal. Now that everything has stabilized most everyone’s SEVs are in line and there is no longer much need to appeal taxes.
If you do feel you are unfairly assessed, the time to appeal is in March. You will receive your assessment early/mid march laying our what you will be assessed at for the next year. That statement will tell you the appeal procedure and dates for your city. You will need to justify your claim, it is suggested you take with you either comparables from a realtor or an appraisal if you have one. Please note, your assessed value is the value of your home on December 31st of the previous year.
You will only see a reduction in your actual taxes if the new SEV is lower than your current taxable value. So there isn’t too much of a reason to appeal unless you think both figures are too high.
If you have any questions about you property taxes or would like comparables for an appeal, contact us below.
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Real Estate One
$14,000,000 Sold in 2014
6960 Orchard Lake #150 West Bloomfield, MI 48322 | 248-419-3160 |
2014 Hour Magazine ALL STAR – Presidents Council of Excellence
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