How to Calculate Michigan Taxable Value

How to Calculate Michigan Taxable Value
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In March of 1994, Michigan voters approved a constitutional amendment that changed the way real estate is taxed. The amendment established “taxable value” as the means to calculate the taxes owed on a property. This is different from the assessed value and SEV. If this all sounds confusing, your next question is probably: How do you find the taxable value of your home in Michigan?

Taxable Value of Home in Michigan

What is the difference between assessed value and equalized value? The assessed value of the property is estimated by the county assessor on Tax Day. For 2021 taxes, Tax Day was December 31, 2020. Once the assessor estimates your property value, you can schedule an appeal in March if you do not agree with the value.

Now, let’s answer the question, What is SEV in real estate? SEV stands for state equalized value. Once all of the March appeals are completed, the SEV is set. This is ​50 percent​ of the True Cash Value for the property that is set on Tax Day; the SEV is set by the County Board of Commissioners and the State Tax Commission and is used to adjust the assessed property value.

How is taxable property value calculated? To calculate the taxable value of your property and how much you owe, you must know the capped value (CV) of your property. The capped value takes into account the inflation rate multiplier and any losses from the property. Losses are considered to be physical rather than financial losses, such as the destruction of a building or damage by a natural disaster; any additions to the property are also taken into consideration.

New construction changes the calculation of taxable value, and any time the property is sold, the property value resets. Your local tax assessor is the best source of information on how these activities might affect your taxable value.

SEV Calculation in Michigan

The formula for the capped value is:

CV = (2020 TV - 2021 Losses) x IRM + 2021 Additions

For 2021, the inflation rate multiplier (IRM) is 1.014.

The taxable value is the lesser of the assessed value or the capped value.

Once you know how to find state equalized value in Michigan you can then calculate your property taxes. Taxes are calculated using a mill levy, where one mill is equal to one-tenth of one cent.

Estimated taxes = (taxable value x mills) / 1000

Considerations for Michigan Taxable Value

There are some things to keep in mind. For instance, any time the property is transferred, either through sale, inheritance or a gift, the assessed value will be used for the taxable value. Also, your assessed and taxable values might not always be the same. For instance, if you live in a neighborhood where property values have increased by 5 percent, your taxable value would be limited to a 1.014 increase, or the inflation rate multiplier for that year.

Another thing to keep in mind is that Michigan gives you a tax break on a home that you occupy as of June 1 of any year. If you purchase a home that was previously a rental, you must file your change with the local assessing office and property transfer affidavit before June 1 if you want to take advantage of the break. Taxes on rental properties are approximately 30 percent higher than on occupied homes.

Calculating your property taxes in Michigan can be complicated, and many factors can affect the calculation. It is especially important to consider the tax implications when considering any changes to the property. If you have any questions, you can always consult a Michigan tax attorney or call your local tax assessor for help.