A Guide to Your Property Taxes and Proposal "A"
Proposal "A": What are property taxes based on?
On March 15,1994, Michigan voters approved the constitutional
amendment known as Proposal "A". Prior to Proposal "A" property tax
calculations were based on Assessed Value.
Proposal "A" established "Taxable Value" as the basis for the
calculation of property taxes. Increases in Taxable Value (following
changes for additions or losses) are limited to the percent change in
the rate of inflation or 5%, whichever is less.
Even in years where we have a stable or depreciating market, the
Taxable Value of a property will increase every year until it reaches
the Assessed Value.
The limit on Taxable Value does not apply to a property in a year
following a transfer of ownership (sale).
What is Assessed Value?
The Michigan Constitution requires property to be uniformly
assessed at 50% of the usual selling price, often referred to as True
Cash Value. Each tax year the local assessor determines the Assessed
Value of each parcel of property as of December 31 (Tax Day) of the
previous year.
If property values are decreasing in your neighborhood, your
Assessed Value will likely decrease. The Assessor’s office normally
analyzes sales in a 24-month period from April of 2005 through March
of 2007 for the basis of the 2008 assessments. However due to the
declining property values, your municipality has decided to use the
12-month sales study which allows for the use of sales from October 1,
2006 through September 30,2007 for the basis of the 2008 assessments.
What is State Equalized Value (SEV)?
The State Equalized Value (SEV) is the Assessed Value as adjusted
following county and state equalization. The County Board of
Commissioners and State tax Commission must review local assessments
and adjust (equalize) them if they are above or below the
constitutional 50% level of assessment.
What is Capped Value?
"Capped Value" is the value established when the prior year’s
Taxable Value, with adjustments for additions or losses, is multiplied
by the rate of inflation. The rate of inflation is capped and cannot
be greater than 1.05 (1+ 5%). For 2008 the State of Michigan has
determined the rate of inflation to be 2.3% (1.023). It represents the
change in the rate of inflation during the previous year. The final
product is the Capped Value.
Capped Value Formula
| Capped Value = (prior year’s Taxable Value –
Losses) x ( 1 +rate of inflation)+ Additions |
*** The Capped Value limitation on Taxable Value does not apply***
***if you purchased your home (or a transfer of ownership) last
year.***
What is Taxable Value?
Taxable Value is the Lesser of the State Equalized Value (SEV) or
"Capped Value" unless the property experienced a transfer of ownership
in the prior year.
How are property taxes calculated?
| Property Taxes = Taxable Value x
Your Local Millage Rate |
Notice of Assessment
Each year, prior to the March meeting of the local boards of
review, informational notices are mailed. The "Notice of Assessment,
Taxable Value, and Property Classification" also includes the
tentative State Equalized Value, and the percent of exemption as a
Principal Residence, and if there was or was not a Transfer of
Ownership.
The Notice includes the dates and times of the March Board of
Review. The Board of Review can hear appeals of the current year’s
Assessed and / or Tentative Taxable Value, Property Classification
Appeals, and Poverty Exemptions under MCL 211.7u.
What is a Principal Residence Exemption?
If you own and occupy your home as your principal residence,
it may be exempt from a portion of local school operating taxes. On
your "Notice of Assessment" the current amount of your principal
residence exemption is listed.
Where can I get additional information?
Most communities have individual assessment information online on
their websites for your review. In addition you can contact your local
assessor’s office during normal business hours. For your convenience
the Assessor’s office will be open late Thursday, February 28 until
9:00 p.m. to answer calls and meet with property owners.
What happens when you purchase a home?
When a property (or interest in a property) is transferred, the
following year the Taxable Value will be the same as the SEV. The
Taxable Value will then be "capped" again in the second year following
the transfer of ownership.
Examples
Example #1
You purchased a home in 2007
| In 2007, you purchased a home valued at
$300,000 (true cash value) with Assessed and State Equalized Value
both at $150,000, and a Taxable Value of $110,000. A study of
similar sales in your neighborhood shows the true cash value of
the property has increased to $310,000 for 2008.
FOR 2008:
Assessed Value is $155,000
Taxable Value is $155,000
Value is “uncapped” the year following a transfer of ownership
(sale) of a property, and therefore the Taxable Value will be the
same as the Assessed Value. |
Example #2
You made no changes to your home in 2007, and your property’s value
decreased and the difference between assessed value and taxable value
is a small amount.
| In 2007, your home was valued at $300,000
(true cash value) with Assessed and State Equalized Value both at
$150,000, and a Taxable Value of $145,000. A study of similar
sales in your neighborhood shows the true cash value of the
property has decreased to $290,000 for 2008.
FOR 2008:
Assessed Value is $145,000
Capped Value is ( $145,000 x 1.023*) $148,335
Taxable Value, (the lesser of the Assessed or Capped) is
$145,000
* The capped value equals the prior year’s Taxable value
multiplied by the rate of inflation (2.3%). The rate of Inflation
is determined annually by the State Tax Commission. |
Example #3
You made no changes to your home in 2007, and your property’s value
decreased and the difference between assessed value and taxable value
is a large amount.
| In 2007, your home was valued at $300,000
(true cash value) with Assessed and State Equalized Value both at
$150,000, and a Taxable Value of $110,000. A study of similar
sales in your neighborhood shows the true cash value of the
property has decreased to $290,000 for 2008.
FOR 2008:
Assessed Value is $145,000
Capped Value is ( $110,000 x 1.023*) $112,530
Taxable Value, (the lesser of the Assessed or Capped) is
$112,530
(Taxable Value will still increase even though there is a
decrease in Assessed Value because the Assessed Value still
exceeds the capped value)
* The capped value equals the prior year’s Taxable value
multiplied by the rate of inflation (2.3%). The rate of Inflation
is determined annually by the State Tax Commission. |
Example #4
You added an addition to your home in 2007 worth $40,000
| In 2007, your home was valued at $300,000
(true cash value) with Assessed and State Equalized Value both at
$150,000, and a Taxable Value of $110,000. A study of similar
sales in your neighborhood shows the true cash value of the
property (with the addition) has increased to $340,000 for 2008.
FOR 2008:
Assessed Value is $170,000
Capped Value is ( $110,000 x 1.023*)+ 50% of $40,000
$132,530
Taxable Value, (the lesser of the Assessed or Capped) is
$132,530
* The capped value equals the prior year’s Taxable value
multiplied by the rate of inflation (2.3%) plus ½ the amount of
new. The rate of Inflation is determined annually by the State Tax
Commission. |
Northville Township
44405 Six Mile Rd.
Northville, MI. 48168
(248) 348-5800
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Assessing