Michigan property taxes are a fee charged against real property by the local municipality. This may be a Township, Village, City, County or, in some cases, a combination.
Property taxes are typically billed twice per year – summer and winter. In this post we will go over how to calculate your Michigan Property Taxes.
Disclaimer: Access Property Management Group, LLC does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. End Disclaimer.
There are 4 important factors you need to know when calculating or estimating your Michigan property taxes:
The calculation of property taxes depends on a few factors about the ownership of the property:
To show the differences with each situation we will use a sample property with the following tax rates:
First we will cover if you are the current owner of this property AND this home is your primary residence. You will use Taxable Value, the Millage Rate and the Principal Residence Exemption in this calculation. For this example the millage rate would be 50 – 18 (PRE) = 32 mils:
$30,000 TV / 1,000 = 30 x 32 mils = $960
Next situation: you are the current owner of this property AND this is a rental or 2nd home (NOT your primary residence). You would still use the TV and millage rate but the Principal Residence Exemption would not apply. For this example the millage rate is not reduced:
$30,000 TV / 1,000 = 30 x 50 mils = $1,500
Thirdly, if you are buying this property as your primary residence, use the SEV, millage rate and the PRE to estimate your taxes after purchase. So we go back to the 32 millage rate:
$45,000 SEV / $1,000 = 45 x 32 mils = $1,440
Finally, let’s say you are buying this property as a rental or 2nd home. Your taxes after purchase would be estimated using the SEV and full millage rate only:
$45,000 SEV / $1,000 = 45 x 50 mils = $2,250
There you have it. Figuring out what numbers you are working with is the hardest part. Once you have those, you can plug them into the equation that fits your situation. But make sure you use the right equation when calculating your Michigan Property Taxes. As you can see there is a significant difference in the annual property taxes after a sale and depending on the use of the property.
The biggest mistake you can make when purchasing any property is to estimate future property taxes based on how much the seller is currently paying! In doing so you could potentially underestimate your taxes by 50% or more. This mistake could easily erase all potential cash flows on a rental property.
Need help figuring our your millage rate before you buy? We would be happy to help. Email us at firstname.lastname@example.org or call us at 616-301-9450.
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