With the updated property tax assessments showing up in our mailboxes, the township  has published some frequently asked questions below:

Why is there a taxable value and assessed value? Why are they not the same?
In 1994 the voters in the State of Michigan passed a ballot proposal commonly called “Proposal A” that made major changes to how property taxes are calculated.  The biggest impact for taxpayers is that Proposal A limits how much the taxable value of a property can increase each year – either by the rate of inflation or by 5%, whichever is less.  This created the need to track the taxable value separately from the assessed value, which is tied to the estimated market value of the property.

In Michigan, taxes are based on the taxable value of the property, not the assessed value. The taxable value can never be higher than the assessed value. However, in a year following a property sale, known as a transfer of ownership, the taxable value will be equal to the assessed value.

Assessed value is the value of a property estimated by the Township Assessor as of tax day. For 2020, tax day was Dec. 31, 2019.  The assessed value represents 50% of the market value, or true cash value of the property, on tax day.

Taxable value is a figure determined by a mathematical calculation known as the capped value formula.

Capped Value = (prior year’s taxable value – losses) X 1.019 (2020 inflation rate) + additions.

Additions are defined as increases in the property’s value caused by new construction, remodeling. Losses are defined as decreases in value caused by the removal or destruction of property, or the value of property that has been removed from the assessment.

Why do I have a similar assessed value to my neighbor, but my taxes are higher?
Michigan property taxes are based on the taxable value, not the assessed value. Since the taxable value often grows more slowly than assessed value it is often the case that residents that have owned their home for a longer period of time pay less taxes than someone who just purchased a home of equal market value.  This is a result of Proposal A that was approved by the voters of Michigan in 1994.

Why isn’t my new assessment 50% of my purchase price?
Michigan law does not allow an assessor to determine assessed value for each individual property, but rather at the neighborhood, or groups of properties, level. The assessor is required to review sales and compare them to the assessed value of those properties.  This information is then utilized to determine how a neighborhood will be adjusted as a whole, using a mass appraisal model.

I just bought property, why is the assessed value and the taxable value the same amount in the year following the sale?
Due to the state’s Proposal A law passed in 1994, it is required that the taxable value of a property become uncapped the year following a sale. Uncapping is a one-time occurrence for a newly purchased property and brings the taxable value up to match current market value. The next year, the property would be capped again and the taxable value would only rise based on the consumer price index, also known as inflation rate.

What is the consumer price index and how does it affect me?
The consumer price index, or inflation rate, is a figure determined by the federal government and increases the taxable value on an annual basis. For 2020 the consumer price index is 1.9%, meaning, the taxable value will increase at this rate for the current year. By law, this increase can never be more than 5%, even if the consumer price index is higher.