How do property taxes work in Michigan?
Michigan property taxes are calculated by multiplying your property’s taxable value by the local millage rate. Understanding three key values helps buyers navigate the system:
Assessed Value / State Equalized Value (SEV): The assessor sets this at 50% of the estimated market value. County and state review ensures uniformity. SEV moves up or down with real estate market conditions.
Taxable Value: This is the value your taxes are actually calculated on. Michigan’s Proposal A (1994) caps annual increases in taxable value at the inflation rate or 5%, whichever is lower, protecting long-term owners from sudden tax increases.
Uncapping: When property ownership transfers, the taxable value “uncaps” the following year and resets to equal the SEV. Meaning new buyers often pay higher taxes than the previous owner, who may have benefited from years of capped increases.
What this means for buyers: If you purchase a property, your first full year’s taxes will be based on the SEV, not what you paid or what the seller paid. In a rising market, this can work in your favor if SEV lags behind sale prices.
Principal Residence Exemption: If the property becomes your primary home (occupied 6+ months per year), you qualify for an 18-mill exemption—roughly $18 per $1,000 of taxable value. Your title company will prepare an Affidavit 2368 at closing, and the affidavit is then filed with your township assessor.
