Real Estate Agent Russ Ravary
Russ Ravary
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How Michigan property taxes work

Whether you are moving to Michigan for the first time or have lived here Michigan property taxes can be confusing.  Here is an explanation of how Michigan property taxes work.  We have two separate taxes that are collected each year.  The two main confusing parts sof Michigan property taxes is how the are run, and why they are different amounts. 

Summer taxes also known as            that are due on July 1st of each year.  They usually can be paid from July 1 to September 14th without penalty.  However some muncipalities have different due dates.  They may be earlier or later than September 14th according to the communities charter.  If they are not paid on the due date interest is charged and they become a lein on the property.  Michigan's summer property taxes run from July 1st of this year to June 30th of the next year.

Winter taxes are also known as     and due on December 1st of each year.  Winter taxes are due without interest December 1 through February 14.  Remember some muncipalities have different due dates.  So check with your town.   If they are not paid on the due date interest is charged and they become a lein on the property.   Michigan winter property taxes run from December 1st of this year to November 30th of next year.

The first thing I will cover is that in most metro Detroit communities Michigan property taxes are paid ahead.  So you pay them on December 1st you are paying ahead until the end of next November.  It is the same way with summer taxes.  You are paying ahead when you pay the treasurer on July 1st until the end of June next year.  So remember you are paying your taxes ahead.


 

1.) Confusing part of Michigan property taxes

The time it runs from.  Many people believe that Michigan property taxes run for six months.  They think that the summer taxes cover from July 1st to November 30th and the Winter taxes cover from December 1st to June 30th.  That is wrong.  Michigan's summer property taxes run and cover you from July 1st of this year to June 30th of the next year.  Michigan winter property taxes run and cover you from December 1st of this year to November 30th of next year.   They are not 6 month taxes they are 1 year taxes.

 

So when you close on a home the title company is going to prorate the taxes into 365 day increments.  They are going to calculate how many days you live there to figure out how many days of summer taxes you have used and how many days of winter taxes you have used.  The reason for this is that why should the buyer get the rest of the year paid for by your tax dollars.  So it is customary in Michigan for the buyer to pay the seller back the unused portion of Michigan property taxes.  That is the way property taxes are divided when a home changes hands in Michigan.


 

When you sell a home or refinance a home when it is close to the time of the tax bills it can be confusing also to many people.   Title companies must have the tax money to pay the winter and summer taxes because they are a lien on title.  So if you are closing right before the statements come out the title company will usually hold 1 1/2 times the old bill to protect themselves from any shortage.  If you are refinancing the taxes must be paid by the title company and be included in the refinance charges because it is a lien on title.  It does not matter if you have not hit the due date of September or February.  If you did not pay them later the title company would be liable and they are not going to take that chance.  They have to get the money at the closing table.  They are going to make sure the taxes are paid and that their will be no claim against their title insurance because they failed to have the property taxes paid current.

 

Explanation of State Equalized value

The next confusing part is how they split up your tax bill into two figures.  The first figure they use is the State Equalized Value.  (SEV)  This is what the city assesor figures your house to be worth.  The city assessor determines this value yearly based on what similar homes have sold for in your area and apply a formula to come up with the State Equalized Value for your home.  If you times the SEV by 2 that is what the city says your home is worth in todays market.  Many home buyers and sellers assume that this is what their home is worth.  It is like a zestimate from zillow.  It really does not mean anything.  Sometimes the SEV values are close and sometimes they are way off from what a home can truly sell for.  Remember they do not take into account all your updates, the odd layout, the cell tower next door, or how bad or how good condition your home is in.  That is why it is important to talk to a realtor when pricing a home.

So your SEV is determined by the city assessor based on this years sold homes and what they know about your house.  When you buy a home the taxes in the first year are based on the SEV.  Your home will reset to the SEV times the millage rate.  After that your homes taxes will be the second figure you will see on your statement.  The second year you own your home your taxes will be the taxable value times the millage rate.  It will be the same way every year there after.  The taxable value is the number you will want to look at.  After your first year in your home your taxes can only rise 5% or the rate of inflation (whichever is less).  So your Michigan property taxes can only go up a maximum 5% in one year. REMEMBER YOUR SEV CAN GO UP MORE.  But that does not matter to you because your taxes are now based on the taxable value on your Michigan property tax bill.  Usually after you live there for a while there will be a wide discrepancy between the taxable value and the SEV.  The SEV value will be higer.

I hope this explanation of how Michigan property taxes works helps you.  If you have more questions about your taxes call your communities assessor or treasurers department.  They will be glad to help you.