Property Tax Appeal Guide

A Guide to the Michigan Property Tax Appeal Process

The good news is you don’t need to accept the value your local assessor places on your property.

This guide provides explanations, information to help you determine if you can reduce your Michigan property tax bill, answers questions you might have about your property tax, and also includes an example of an appeal letter outlining what you need to address when you begin the process of appealing your property taxes in Michigan.

Many wonder, “What makes up my Michigan Property Tax?”

As you know, Michigan property taxes can be significant. Public schools, local government, community colleges, public transportation, libraries plus much more are funded by property taxes.

How Michigan Property Taxes are Determined

What prompts a visit from local assessors?
There are three main triggers which result in a visit from your local assessor:

  1. The calendar
    -local accessors normally visit each parcel every five years
  2. Being added to the tax rolls
  3. When property goes through a significant change
    -such as a new building

During the assessor’s visit a worksheet is completed and the necessary assessing information is recorded. The data from the worksheet is transferred to an Assessment Card in the assessor’s office, and in most cases the Assessment Card is computerized. The software assists the assessor in determining your property’s value.

The value used to determine your property tax bill
Each property owner is mailed a Property Tax Assessment Notice. This is a record of how much your assessor believes your property is worth. This value is recalculated every year and can change due to inflation, the local housing market, and any improvements to your property. This value will be used to determine your property tax bill, unless you can successfully appeal the amount.

The Information Your Property Tax Assessment Notice Contains

The notice contains three values you should be familiar with:

  1. Assessed Value (AV)
    - This is one-half of the actual value of your home.
  2. State Equalized Value (SEV)
    - In almost all cases, the SEV is identical to the AV.
  3. Taxable Value (TV)
    - This is the amount that your property taxes will be based on.

Upon sale of the property, the TV “uncaps”
When you purchased your home, the SEV and the TV were identical. Proposal A, approved by voters in 1994, prohibited the Taxable Value from increasing by more than inflation or 5% in any year. During the years you’ve owned your home, its value likely increased faster than inflation. Over those years, the gap between these two values continued to grow. Upon sale of the property, the Taxable Value “uncaps” and becomes the new amount of the SEV.

Taxable Value is the most important number to homeowners. The amount of property taxes for any parcel is the TV multiplied by the total millage rate in that jurisdiction. Only by reducing the TV can you reduce your property taxes.

Many property owners consider any increase in the SEV a bad thing, but you will not pay taxes on this amount. In fact, it can be beneficial for these values to increase. A larger AV can increase your home’s sale price and makes refinancing or obtaining a second mortgage easier. However, when you try to sell your home, potential buyers know they will have a larger tax bill than you did because the TV “uncaps” after the purchase. This is sometimes referred to as the “pop-up tax.”

The Assessed Value of your home is not based on the sale price. The law is clear that this value is determined by comparing your house to those that are comparable in the area.

Your Legal Right to Appeal Your Property Tax Assessment

What you can do if you believe the assessed values are too high.
Michigan law gives you the right to appeal your property tax assessment. You begin this process during a meeting of your local Board of Review. This select group of local citizens have been appointed to hear property owners’ property tax appeals. Your assessor’s office sends your Property Tax Assessment Notice to you at least fourteen days before the Board of Review meets. Michigan law only permits them to lower the SEV under specific circumstances. The Board of Review does not have the authority to set tax rates, and can only adjust the Assessed Value, Taxable Value, or Property Classification.

Changing the Assessed Value does not reduce your taxes
Because there is a difference between a home’s Assessed Value and the Taxable Value, changing the Assessed Value does not reduce your taxes. Changes to the Assessed Value will only reduce your taxes if the Assessed Value goes below the Taxable Value. For that reason, most successful appeals occur the year following a sale.

Valid Reasons for Reducing Your Property Tax Assessment

Believing your taxes are too high is not a sufficient reason to appeal to the Board of Review. Additionally, you can’t appeal the values because you are not able to pay your tax bill.

8 Different Reasons Used as the Basis for a Property Tax Appeal

  1. The property has the wrong property classification.

    There are several classifications of property in each jurisdiction, such as residential, commercial and industrial. If your home is classified as commercial but is actually only a residence, you may be able to have your taxes reduced. The classification is a number located near the top of the form. You will need to ask the assessor’s office for the class that corresponds to that number.

  2. The Principal Residence Exemption is missing.

    Property in Michigan that is not a principal residence is subject to an additional 18 mills for school operation. You must file for this exemption by May 1 to receive it in that year. Once it is on file, it will remain until the use of the property changes. Near the bottom, the Assessment Notice tells how much of the property is exempt as your principal residence. If you have filed a Principal Residence Exemption, the amount on the Assessment Notice should be 100%. If it is not, check with the assessor’s office to determine why. Two basic grounds for appeal require a copy of your Assessment Card, which you can get at the assessor’s office. This sheet has the information the assessor uses to determine your Assessed Value.

  3. There is a mistake on the Assessment Card.

    The card may have the wrong dimensions for your home or property. It may say you have a finished basement when it is actually unfinished. Does it list three bathrooms when there are only two? Does it claim you have city water and sewer rather than a well and septic? If there is a mistake on your card, ask that the property be revalued. Every property owner should have a copy of their Assessment Card, whether they intend to appeal their taxes or not. In many jurisdictions, you can download a copy online. Assessors are human and can make mistakes. Review the card for your property. If you find an error, you will have lower taxes for the current year and are entitled to a refund for the three prior years.

  4. The “Percent Good” is too high.

    Your Assessment Card or worksheet will have a “percent good” calculation. This is the method your assessor used to depreciate the value of your home. If your home is ten years old, this number should be about 90%. The four remaining reasons for appealing your assessment are based on the value that was determined for your property. These require you to do more homework to make a case to the Board of Review.

  5. There are problems with the home not on the Assessment Card.

    As homes get older, there will be wear due to age. That is normal and is reflected in the Percent Good figure. Occasionally, there are more serious problems not due to normal aging. There may be a crack in the foundation, windows that won’t open or floors that are not level. Photographs and repair estimates are evidence of these problems. Inspect your home to determine if there are problems.

  6. The house is in a poor location.

    Location is one of the most important factors in the value of a home. The same is true for the value on your Assessment Notice. Is your home near a major highway, airport, or industrial area? Have there been complaints filed with law enforcement about illegal activities or noisy neighbors? Is there a large amount of truck traffic? These can lower your home’s value.

  7. The value of the home is higher than the sale price.

    If you recently purchased your home, that sale price is strong evidence of the true value. If appliances or furniture were included in the sale, that amount should be subtracted from the home’s Assessed Value. The sale price does not automatically become the new SEV when a home is sold. The beginning SEV is the normal selling price of comparable houses in your area. An appraisal can also provide evidence for the Board of Review. Be careful. It makes no sense to spend $500 on an appraisal to save $10 per year in taxes. Also, check to be certain that your Assessed Value has not increased by more than 5% or the rate of inflation from last year. That information is on the Assessment Notice.

  8. The Assessed Value is more than comparable homes.

    This method of challenging the value placed on your home can be effective but requires some work. Comparables are the methods realtors use to determine the value of any property. They look at the selling price of similar homes in the area to determine how much your house is worth. There are some questions that you need to find the answers to. How much are the taxes on the house on the next block that is almost identical to yours? How much did a similar house down the street sell for last month? Record the answers in an easy to read form and take it with you to the Board of Review meeting.

How to Appeal Your Property Taxes

You may be able to talk directly to the assessor about errors on your Assessment Card. If an error exists, the assessor will make the necessary changes. December 31 is tax day in Michigan. After December 31, and for value appeals, the Board of Review is your only option for relief.

You will receive your Assessment Notice the first week of March. Review it for any of the errors above. If you want to appeal the value of your property, you must do so at the Board of Review meeting in March. Your Assessment Notice should tell you the time and place of Board of Review meetings. The Board of Review is required to meet for twelve hours to hear taxpayers’ appeals. At least three of these hours must be in the evening.

Put all the information you collected in writing. This will help you organize it in a logical manner. Check with your city or township. They may have a form you need to complete to make an appeal to the Board of Review. Make copies of the completed petition and your letter. You should leave copies of both with them at the meeting. The Board of Review may not give you a decision while you are at their meeting. When they discuss your appeal later, they will have your facts and figures to refer to.

An appeal to the local Board of Review is important and a prerequisite to appealing that Board’s decision to the Michigan Tax Tribunal if you contest the Board of Review decision.

It’s not necessary to attend the meeting in person. You can send a letter to the Board of Review who will make a determination based on what you present to them. If you have a conflict with their meeting times, a written appeal may be the only way to have your case heard. It’s preferable to attend the meeting even when you have put your case in writing. That way the Board of Review can ask you questions about your property. This also ensures your letter isn’t simply misplaced.

The Board of Review also meets in July and December after sending summer and winter property tax bills.The only appeals they hear at these times are those based on errors on those bills as well as principal residence exemptions and qualified agricultural exemption matters.

What You Can Do If the Board of Review Does Not Agree With You

Michigan law provides that a property owner can appeal the decision of the Board of Review to the Michigan Tax Tribunal.
This process is more like a court proceeding than a local meeting. Most property owners are not comfortable handling this appeal themselves. They will typically hire an attorney, realtor or appraiser to assist them.

This is a long process. It may take as long as three years to conclude. The property owner is required to pay the higher tax rate until that time. If the owner wins the appeal, the additional amount is returned with interest.

You need not accept the value that the local assessor places on your property. Particularly after the purchase of property, there is an opportunity to appeal your assessment to the Board of Review. This is one instance where you can fight city hall.

Click here to view an example of a Property Tax Appeal letter.

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Dan A. Penning

Michigan Property Tax Uncapping Expert Dan A. Penning Icon

 
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