Are you thinking of buying a property in Michigan? If yes, the question, “how are property taxes calculated?” should grab your attention.
Understanding how to calculate property tax before purchasing a property in Michigan is essential. With such knowledge, you can determine if your property’s assessed value is high and doesn’t reflect the actual value.
Property taxes in Michigan are one of the highest in the country. While the national average is 0.99%, Michigan’s effective tax rate is approximately 1.32%.
Here, we will discuss how to calculate your property taxes in Michigan and share other related information about the subject. Read for more details.
How Are Property Taxes Calculated In Michigan
Tax rates in Michigan apply to the property’s taxable value. The property tax rate is referred to as millage and expressed in mills.
One mill is equivalent to $1 for each $1000 taxable value. Thus, if your total tax rate is 20 mills, and you have a taxable value of $50,000, your annual tax will be $1000.
A Handy Tip: The taxable value is the value on which property taxes are determined. You can get this value from the property tax statement or contact your local assessor.
Millage rate refers to the rate at which property taxes are levied on a property. One mill equals 1/1000 of a dollar. You can contact your local treasurer or check your property tax statement to know the mills levied on your property.
To calculate property tax, multiply the property’s taxable value by the number of mills levied on the property.
What Are The Property Tax Exemptions In Michigan?
Michigan’s property tax has some exemptions, which can help to lower one’s tax bills. Check them out below.
- There are exemptions for non-profit housing for disabled families or older people.
- You can get an exemption if you’re a disabled veteran and honorably discharged from the United States Army.
- You can get an exemption on portions of the property that boast trees, including erosion control features like a seawall, wind-water energy conversion devices, etc.
What Can Increase Your Property Tax Rates In Michigan?
No property owner in Michigan would like to see their property taxes increase. Many would even be happy to stop paying such taxes. But we all know that isn’t going to happen.
Homeowners take specific steps that increase their property taxes. For instance, many forget that when a property’s value increases, its taxable value increases too.
How does a property’s value increase? You increase the property’s value when you remodel, roof, construct a pool, and perform other upgrades. So, ensure you’re ready for a tax increase before upgrading your property.
What other reasons can make property taxes increase?
The municipal amenities, recreational services, residential services like garbage pickup, municipal employee pay, and other services are made possible because of the taxes the state collects. Michigan depends on your taxes to make all these services run smoothly.
But the fact that Michigan depends on property taxes is not the only reason for your high taxes. Another reason is the PRE (Principal Residence Exemption).
What does the PRE mean? It implies that if the property is yours and you reside there, you can get an exemption. Just file an affidavit that exempts you from school taxes.
The exemption can wipe off up to 18 mills. And as you know, a mill is equivalent to $1 per $1,000 taxable value.
A Handy Tip: If you own an investment property, your real property tax will be higher than someone whose property is his principal residence.
The amount schools receive from homeowners will also be affected, though this depends on the percentage of rentals occupying the area. So, PRE rates may influence the amount municipalities charge.
How To Determine If Your Property’s Taxable Value In Michigan Is High
How can you know if the taxable value your tax assessor placed on your property is high and shouldn’t have been the case? Here is a simple way to find out.
Two critical details will help you determine if your tax assessor placed a high taxable value on your property.
- First is how the tax assessor treated other homes similar to yours.
- The second is how much homes like yours cost.
If you have this information, you should be able to know if your property’s taxable value is high and needs to be reviewed.
How can you get information about the taxable value of homes similar to yours and the sale prices of homes similar to yours, too?
Let’s start with the information on the taxable value of homes similar to yours. How can you get this information?
Firstly, understand that you cannot determine the taxable value of homes by visiting each property and interviewing the homeowners of those properties. Such a step would be counterproductive and time-wasting.
An ideal way to get information on the taxable value of homes similar to yours is by approaching your tax assessor. Visit their office and demand for the document.
This is the right thing to do if you think your property taxes are too high. Though the process can be time-consuming, it is worth it. You’ll have the information you need to approach your tax assessor for a review of your property’s taxable value.
Now, let’s assume you have a 3-bedroom ranch-style home in a subdivision that boasts many houses similar to yours. Your property’s taxable value is $380,000.
You checked the record for numerous homes in the subdivision and discovered that the average taxable value of those homes is $335,000. What makes it even worse is that these homes have a finished basement, while yours doesn’t.
In this scenario, you have enough evidence to claim your property’s tax value is high. You should even be paying less than those homes.
Another piece of information you need to determine if the taxable value is high is the price of similar homes in the area. How do you determine this?
The simple process is by looking at the prices of homes in the area. In addition, if you recently purchased your property, the price you paid for it is good evidence of its current value.
Again, visiting every newly acquired property in the area to interview their owners will be counterproductive. You’ll only waste a lot of time and not achieve your aim.
Instead, you can contact an experienced real estate broker. Ask for information about the prices of recently acquired properties in the area and other details you want to know. However, remember that the broker will request a fee to get the requested information.
Another way to get information about the prices of newly acquired properties in the area is by hiring a private appraiser. The appraiser will gather all the necessary information about newly acquired homes in the area and hand it over to you.
The only challenge with hiring a private appraiser is the fee. Most people might consider hiring an appraiser to be too expensive.
A Handy Tip: The prices of homes you find on most listing sites are computer-generated. Thus, you might be misled. For example, most of the prices on Zillow are computer-generated. The people running the platform don’t visit the listed properties.
Who Should Pay Property Taxes In Michigan
You owe the state property taxes if you have a real property. It does not matter whether you inherited the property or got it as a gift.
The Michigan tax collection authorities do not care how you got your home. You’re expected to pay taxes on the property as long as you own it.
The state collects taxes twice annually. In addition, there is nothing like a minimum or maximum amount one has to pay as a property tax. Instead, your tax assessor will calculate your taxes based on its value.
When Are Property Taxes Requested In Michigan?
The state collects two types of property taxes at different times of the year. There is a winter and a summer property tax.
When is the winter property taxes paid? It begins from December 1st to February 15th of the following calendar year. In other words, you’re expected to have paid your property taxes on or before February 15th of the following year.
When are the summer property taxes requested? In the summer, payment for property taxes in Michigan starts from July 1st to September 15th of the same year.
You have a grace period of 3 months from the day your summer property tax becomes active. The state expects you to pay your summer property tax on or before September 15th.
Are there fines for late payment of property taxes in Michigan? Yes, there are. However, the fine depends on how late you are on the payment.
The Uses of Property Taxes In Michigan
Michigan’s local governments depend heavily on property taxes. They use it for various public services, which residents also benefit from.
So, property taxes represent critical revenue sources for local governments. And you have to pay it twice yearly.
Here are the uses of property taxes in Michigan.
- Local levies
- Protective services
- Recreational services
- Municipal employee payments
- General government services
- Residential services such as garbage pickup
- Land construction or improvement
- Municipal infrastructural development
- First responders and other law enforcement
These are what the property taxes Michigan collects are used for. While taxes are a massive burden for the taxpayers, the fact that they are used for the state’s good should encourage people to pay.
Highest And Lowest Property Tax Rates In Michigan
Are you planning to purchase a property in the Great Lake State? If yes, then you need this information. Understanding how much the property taxes in the various counties are can help you make an informed decision.
The county with the highest property tax in Michigan is Wayne County. It boasts a property tax rate of 2.69%, making it the county with the 31st highest tax rate across the country.
The high property tax rate in Wayne County won’t surprise most Americans, though. Why? Detroit is part of the county, and we all know it boasts the most expensive property tax in the United States of America. No city in the country comes close.
Other counties with high property tax rates:
| County | Average Effective Real Property Tax Rates (%) | Median Annual Real Property Tax Payment ($) | |
| 1. | Ingham County | 2.23 | $2,761 |
| 2. | Genesee County | 1.91 | $1,845 |
| 3. | Calhoun County | 1.89 | $1,944 |
Michigan also has counties whose property taxes are 1% or lower than a home’s value. Check out the examples below.
| County | Average Effective Real Property Tax Rates (%) | Median Annual Real Property Tax Payments ($) | |
| 1. | Leelanau County | 0.90% | $2,244 |
| 2. | Benzie County | 1.95% | $1,954 |
| 3. | Mackinac | 1.07% | $1,344 |
| 4. | Luce | 1.11% | $922 |
| 5. | Oscoda | 1.08% | $901 |
A Handy Tip: Washtenaw County boasts the highest median property tax payment ($4,079). They are followed by Oakland County ($3,429) and Ingham County ($2,761).
What Will Happen If You Can’t Pay Property Taxes In Michigan?
Property taxes in Michigan are compulsory and important. In other words, you must pay taxes on your property.
Becoming a tenant is the only way to be free from paying property taxes. In this case, you have to sell your property. You can also use the sell-leaseback option to become a tenant of your property after selling it.
There are penalties for failing to pay property taxes in Michigan. But the most severe punishment is a forfeiture of the property.
Real property tax delinquency in Michigan comprises a three-year forfeiture and foreclosure procedure. Here is how it goes.
If your real property tax enters the second year of delinquency, the parcel will be forfeited or handed over to the county treasurer.
The property will be foreclosed if the real property taxes remain unpaid in the third year of delinquency (as of March 31st).
A Handy Tip: The Foreclosing Governmental Unit (FGU) forecloses properties of real property tax violators.
Conclusion
How are property taxes calculated in Michigan? You can compute property tax by multiplying the property’s taxable value by the number of mills levied. Note that one mill is equivalent to 1/1000 of a dollar.
Property taxes are essential to the Michigan government. They are a source of revenue for local governments and help to fund the great work across the state.
These taxes are necessary for the state to keep several public services running. So, it’s essential to pay your taxes. However, we advise that you consider the tax rates in different parts of the state before deciding.
