Assessments, Taxes, and How It All Works
How does the Assessed Value on your house determine your property taxes?
Notice of Assessment
In early February every year, the City sends every home owner a "Notice of Assessment, Taxable Valuation, and Property Classification." (Find yours to help you follow along.)
There are three components of the property tax to look at on this form.
- Assessed Value. This generally is equal to the State Equalized Value.
- State Equalized Value (SEV). This is supposed to be equal to 50% of the market value of the house. A house with a market value of $200,000 would have an SEV of $100,000 and, therefore, have an AV of $100,000.
- Taxable Value (TV). Property tax is based on the Taxable Value. Your property tax is your TV times the millage rate.
Your tax is not shown on the "Notice" form. The millage rate also is not shown there. All you see is the Taxable Value. Millage rates are shown on your tax bills.
Tax Calculation
Your property tax is your TV times the millage rate. In 2008, the City millage rate was 74.5 mills and the County rate was 8.5 mills. On a house with a TV of $100,000, the City tax would be TV times 0.0745 (or 7.45%). That is, $7,450. The County tax would be $850.
In principle, taxable value is supposed to equal assessed value. An owner would pay taxes on the full assessed value of the property. However, in Michigan, this is not always the case. For some owners, the taxable value is less than the assessed value. The reason is Proposition A, enacted in 1994.
Proposition A
Under Proposition A, the State put a cap on how fast your taxable value can go up.
Taxable value cannot increase more than the rate of inflation or 5%, whichever is less.
Assessed value, however, is not capped and can go up by any amount. And it has!
Whether your taxable value is capped or not is crucial.
- If your taxable value IS NOT capped.
If you appeal and get a lower assessed value, this will lower your taxable value and your property tax. - If your taxable value IS capped.
Appealing your assessed value is unlikely to lower your taxable value or your property tax. But it depends.
HISTORICAL NOTE:
Assessed property values fell for 2008 and 2009.
These reductions reflect the decline in housing prices over the past few years. For one house in Boston Edison, the assessment fell 3.5% in 2008, another 14.5% in 2009, and fell a further 18.0% in 2010. Assessed values on that house were unchanged during the two preceding years (2006 and 2007).
