HMS — Home Marketing Systems Inc. — A Special Services Real Estate Company

Michigan Property Tax

Michigan has a lagging economy related to the flight of manufacturing to oversees locations. As a result, real estate prices are among the lowest in the country. In addition, Michigan's unique property tax structure creates the opportunity for buyers to receive the same low tax burden the seller had. While there is no guarantee the State will not close the loophole, many buyers and sellers are finding significant value at this time. Compare the State Equalized Value and the Taxable Value table below. The greater the difference, the greater the savings and value to the buyer.

In 1991, the people of Michigan passed Proposal A. It was intended to give tax relief to homestead property owners. A dual structure was developed: one for homeowners (homestead) and one for all others (non-homestead). The homestead tax rate is approximately 40% less than then non-homestead rate. The assessment has two parts as well and applies to everyone. The SEV is typically half the value according to the assessor. The TV is multiplied by the rate. The TV was originally equal to the SEV but only rises 3.5% or the cost of living, whichever is less. Over the course of time, the property value might rise a great deal but the TV remains low and the taxes remained low. When the property sells, the assessor uncaps the TV and it rises to the new SEV based on the selling price.

The calculations below demonstrate the difference in what the taxes might be in an arms length transaction. The hypothetical difference in SEV to TV represents an owner who may have owned the subject property for 20 yrs.