Every February, Michigan homeowners get a notice from their city or township with a row of numbers on it. Most people glance at it, see that the numbers went up, and put it in a drawer. That notice is the only warning you get before your tax bill is set for the year, and the window to question it closes in March.
Three of the numbers on it matter most: assessed value, state equalized value and taxable value. They sound alike, and in some years two or all three are the same figure. But they do different jobs.
What the assessor thinks
Assessed value
Half of what your local assessor estimates your home would sell for.
The checked figure
State equalized value
The assessed value after the county and state confirm it really is half of market value.
What you are taxed on
Taxable value
The number your bill is calculated from. Its yearly growth is capped, until the home sells.
Assessed value: half of what your home is worth
Your local assessor estimates what your home would sell for on the open market. That estimate is called true cash value, and in Michigan the assessed value is half of it. A home the assessor believes is worth $400,000 should be assessed at $200,000. The halving is set by the state constitution and it applies to every home in Michigan.
The estimate is pinned to a single day, December 31, using sales from the previous two years. In most communities it is not the result of anyone visiting your house. The assessor works out a value for each neighborhood from recent sales, then applies a formula to every home in it based on what the city’s records say about the house: its size, age, quality, basement and so on. If the records are wrong, or your house differs from its neighbors in ways the formula does not see, the estimate can be wrong too.
State equalized value: the assessed value, checked
Michigan has more than 1,500 cities and townships, each with its own assessor. To make sure a home in one is not valued more aggressively than a home in the next, the county and then the state review each community’s values. If a community’s homes are, on average, assessed below or above half of market value, the county applies a correction factor to bring them back into line. The result is the state equalized value, or SEV.
In most years and most places that factor is exactly 1, so the SEV on your notice is the same as your assessed value. The practical point is that SEV is the official version of your home’s half-of-market value, and it is the ceiling for the number that comes next.
Taxable value: the number your bill is based on
Since 1994, when voters approved Proposal A, Michigan has limited how fast your tax bill can grow while you own your home. Each year your taxable value can rise by no more than the rate of inflation or 5 percent, whichever is lower, plus the value of anything you add, such as an addition or a finished basement. Your home’s market value might jump 10 percent in a year; your taxable value cannot.
Your taxable value is the lower of two numbers: that capped figure, or your SEV. For someone who has owned a home for many years, the capped figure is usually far below the SEV, so the cap is doing the work.
Your tax bill is your taxable value multiplied by your local tax rate. Rates are quoted in mills: one mill is $1 of tax for every $1,000 of taxable value. A home with a taxable value of $200,000 in a community levying 40 mills pays $8,000 a year.
The catch: buying a home lifts the cap
The cap belongs to the owner, not the house. The year after a home changes hands, its taxable value “uncaps” and resets to the full SEV. The new owner’s bill is figured from the assessor’s estimate of market value, not from the seller’s years of capped growth. This is why a buyer’s first full tax bill is often thousands of dollars higher than the one the seller paid, and why the assessed value suddenly matters so much.
Here is what that looks like with round numbers. Say you buy a house for $400,000. The local tax rate is 40 mills, which is simply 4 percent of the home’s taxable value each year.
What the previous owner paid
They owned the house for years, so the cap kept their taxable value at $150,000.
$6,000/ yr
What you pay
The cap resets when you buy. The city thinks the house is worth $460,000, so you are taxed on half of that: $230,000.
$9,200/ yr
What you’d pay at your price
If the city valued the house at the $400,000 you paid, you would be taxed on half of that: $200,000.
$8,000/ yr
You overpay every year you own the home
$1,200/ yr
An illustration with round numbers, not a real property. Your real rate depends on your community, your school district and whether the home is your primary residence.
Paying more than the previous owner is normal; that is how the law is meant to work. The extra $1,200 is not. It exists only because the city values the house $60,000 above what it sold for. And because next year’s cap is measured from this year’s number, the overpayment does not go away on its own. It repeats every year until the value is corrected.
Why this matters when you look at your notice
- You appeal the assessed value, not the taxable value. The Board of Review rules on what your home is worth. If it lowers your assessed value, your SEV falls with it, and so does your taxable value wherever the SEV is what sets it.
- Recent buyers have the most at stake. After a sale, taxable value equals SEV, so every dollar the assessment is too high reaches the bill in full.
- Long-time owners may be protected for now. If your taxable value is well below your SEV, the cap is setting your bill, and a lower assessment may not change this year’s tax. It still matters later: the gap shrinks every year values outpace inflation, and a buyer will one day pay tax on the full figure.
- Check that the homestead exemption is applied. If the home is your primary residence, the notice should show a principal residence exemption of 100 percent. It exempts you from up to 18 mills of school operating tax, which on most bills is the single largest saving available. It is claimed separately from any appeal, on Michigan Form 2368.
Where to find the numbers
All three values are printed on the Notice of Assessment your city or township mails in late February, alongside last year’s figures, the change from one year to the next, your principal residence exemption percentage and whether the property transferred ownership. Many communities also post them on their online property lookup. The notice gives the dates and place of your March Board of Review, the meeting where you can ask for the assessed value to be changed. Bring evidence: comparable sales, an appraisal, photographs of anything the city’s records get wrong.
If your assessed value looks high for what you paid, or for what similar homes nearby have sold for, that is worth a closer look. We review assessments against the community’s own sales study at no charge.