Most Michigan home buyers budget for property tax using the number on the listing. That number is what the seller paid, and in Michigan the seller’s bill almost never carries over. The year after a home sells, its taxable value resets, and the new owner’s bill is figured from scratch. For a home the seller owned for ten years, the first full bill can be thousands of dollars higher.
None of this is a mistake; it is how the law is written. But it catches most buyers off guard because nothing changes for months. Here is how it works, and the few things worth doing before the new bill arrives.
Why the seller’s tax bill doesn’t carry over
Since Proposal A in 1994, Michigan has capped how fast a home’s taxable value can grow while one owner holds it: each year by the rate of inflation or 5 percent, whichever is lower. Home prices have risen much faster than that, so someone who has owned a home for years is usually taxed on a value far below what it is worth.
The cap belongs to the owner, not the house. When a home sells, the taxable value “uncaps” on December 31 of that year, and for the next year it resets to the full state equalized value: half of what the assessor estimates the home would sell for. You start your own capped growth from there. (Our guide to assessed, state equalized and taxable value explains the three numbers on the notice.)
When the bigger bill arrives
The timing is what surprises people. Nothing changes in the year you buy; the reset shows up the following year.
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The year you buy
You pay the seller’s taxes
Taxes are split between you and the seller at closing, and the bills that year are still based on the seller’s capped taxable value. Your lender sets your escrow from those bills too.
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December 31
The cap comes off
The transfer uncaps the taxable value as of the end of the year in which you bought.
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Late February, the next year
Your assessment notice shows the new number
The notice marks the property as transferred, and your taxable value now equals the state equalized value. This is your first look at the reset, and the only time of year you can appeal it: at the March Board of Review.
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July, the next year
The first bill at the new value
The summer tax bill is the first one calculated from your own taxable value. The winter bill follows in December.
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Later that year
Your mortgage payment goes up
If your taxes are paid through escrow, your lender’s annual review finds a shortage and raises the payment, often by enough to cover both the shortfall and the higher bill going forward.
How to estimate your new bill
A quick estimate: take half of what you paid, then multiply by your community’s tax rate. Rates are quoted in mills, and one mill is $1 of tax per $1,000 of taxable value, so 40 mills is 4 percent. Each of our community pages lists the local homestead rate.
Say you bought a house for $400,000 in 2025 from someone who had owned it for years, in a community levying 40 mills on a primary residence.
The seller’s bill, on the listing
The cap kept their taxable value at $150,000.
$6,000/ yr
Your bill from 2026, if the value matches your price
Half of $400,000 is a taxable value of $200,000.
$8,000/ yr
Your bill if the assessor values it at $460,000
Half of $460,000 is a taxable value of $230,000.
$9,200/ 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.
The first $2,000 jump is the law working as intended. If your escrow was set from the seller’s $6,000 bill, expect your lender to collect the shortfall over the next year on top of the higher ongoing amount, which in this example adds roughly $330 a month for a year, then about $170 a month after that.
The extra $1,200 in the last row is different. It exists only because the assessor values the house above what it sold for, and because each year’s cap is measured from the year before, it repeats every year you own the home until the value is corrected.
Three things to file or check now
- Homestead exemption (Form 2368). If the home is your primary residence, the principal residence exemption removes up to 18 mills of school operating tax, usually the largest saving on the bill. It does not transfer from the seller; you claim your own. File by June 1 for it to apply to that summer’s bill, or by November 1 for the winter bill. Many title companies hand you the form at closing; if yours did, check that it was filed.
- Property Transfer Affidavit (Form 2766). The new owner must file it with the assessor within 45 days of the transfer. Title companies often file it for you. A late filing can carry a penalty of $5 a day, up to $200, for a home.
- Your assessment, when the notice arrives. Compare the state equalized value with half of what you paid. If it is noticeably higher, and you haven’t added onto the home since, the reset may be landing on a value above what the home is worth.
When the reset lands too high
It happens more often than you might expect. Across 12,175 home sales from 2024 and 2025 in the published sales studies of 34 Michigan communities, about 1 in 10 recent buyers were assessed more than 10 percent above what they paid. In some communities it is closer to 1 in 4. Our community pages show the share in each.
You cannot stop the uncapping, but you can challenge the value it resets to. The March Board of Review is the only time of year to appeal it, and the deadline to book a time is printed on your February notice. A board will not lower a value on an owner’s opinion alone; it wants evidence. Our step-by-step guide to appealing walks through the process. If you’d rather not do it yourself, our appeal packet puts the evidence together for a flat $350, or with full representation we file the appeal and present it for you.
Common questions
Do property taxes go up the year I buy?
Usually not. Bills in the year of purchase are based on the seller’s taxable value. The change shows up on the February notice the following year and in the July bill after it.
Does every transfer uncap the taxable value?
No. Some are exempt, including transfers between spouses, transfers of a residence to a parent or child when the use doesn’t change, and moving a home into your own revocable trust. A normal sale to a new buyer uncaps it.
Can I appeal the uncapping itself?
No; that part is set by state law. What you can appeal is the assessed value. If the board lowers it, your state equalized value and taxable value come down with it, and the lower figure is what your future cap grows from.
I missed the homestead exemption deadline. Is it too late?
File Form 2368 now so it applies to the next bill. For the current year and up to three prior years in which you owned and lived in the home, you can ask the July or December Board of Review to grant the exemption, and the overpaid tax is refunded.
If you bought in the last two years and your assessment looks high for what you paid, it is worth a closer look. We review assessments against the community’s own sales study at no charge, and tell you plainly whether an appeal is worth pursuing.
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