Many people venture into January with the best intentions for keeping their New Year’s resolutions, only to find they’ve abandoned them by mid-February. But there is one particular resolution, which if you make time for, can save you money in the current year and beyond.
February is the perfect time to give your real property a tax check-up. Due to yearly changes in the True Cash Value, you could save money on your property taxes. First, a little background on the terms at play.
Every year in the state of Michigan, real property is assessed for taxes. The assessment is determined by the “Taxable Value” of the property multiplied by the amount of “Mils” which are determined by the various assessing units (a Mil is 1/1000 of a dollar). The Taxable Value may not be greater than, and is sometimes less than one-half of the “True Cash Value” (fair market value) of the property. Taxable Value can sometimes be less due to the fact that Michigan state laws do not allow it to increase each year by more than the lesser of the rate of inflation as determined by Michigan Department of Treasury, or 5%. This limitation on the increase of Taxable Value only applies during the time the property is owned by the same taxpayer. As a result, in years when the True Cash Value of the property increases by more than the rate of inflation, it is likely that the Taxable Value will drop below one-half of the True Cash Value, as long as the property remains owned by the same taxpayer.
For these reasons, it may be in your best interest to contact your local assessor’s office or look up the assessor’s office data online to determine what has been established as your property’s Taxable Value for that calendar year. If you believe that the Taxable Value of your property when multiplied by two exceeds its True Cash Value, it may be appropriate for you to consider challenging the Taxable Value of the property as being in excess of one-half of its True Cash Value.
This process is slightly different for residential or agricultural property. In those cases, this action must first be initiated at the local Board of Review which meets at the beginning of March. If you are not satisfied with the result as determined by the local Board of Review (for residential or agricultural property), or in the event that you own commercial or industrial property (even if you didn’t go to the Board of Review), you must file an appeal with the Michigan Tax Tribunal to preserve your rights. The Michigan Tax Tribunal filing deadline for residential and agricultural property tax claims is July 31 of the tax year involved (July 31, 2017 for the 2017 tax year). The filing deadline for commercial and industrial property is May 31 of the tax year involved. For residential and agricultural real property, if you do not go to the Board of Review, you may not file with the Michigan Tax Tribunal. However, there is no such Board of Review requirement for commercial and industrial real property.
You should determine the difference between twice the Taxable Value as established by the assessor and the amount that you reasonably consider to be the True Cash Value of your property. This is particularly true for real property where the amounts involved are smaller as opposed to agricultural, industrial and commercial property. Once you have determined the difference, you should divide that number by two, and then multiply the result by the estimated overall number of Mils for all of the taxing jurisdictions which levy taxes in the city, township or village where the property is located. If you are successful in your appeal, this calculation will provide a good estimate of the potential tax savings on an annual basis. The tax rate utilized for the prior years’ taxes should be available to you for your jurisdiction from the county equalization department or the local assessor, and is a good way to estimate the tax rate which will be applied this year. This estimate is necessary because not all of the tax rates are set in January. The assessor’s office or the county equalization department should be able to give you this information over the phone. You should also remember that your tax appeals often extend over a couple of years.
In order to determine the Taxable Value established for your property, you should first check the website of the local unit of government. If that information is not available, you may need to visit the assessor’s office. If the tax savings estimate is small, you may choose to forego an appeal, even though you believe the value placed on your property is somewhat high. In a single family residential appeal where more modest amounts are involved, you most likely will want to try to do it yourself in the Tax Tribunal’s small claims division. With regard to agricultural, commercial or industrial real estate and for multi-family residential real estate where the valuation issues are much more complicated and the dollars involved are much higher, professional assistance is a necessity.
You should understand that with regard to any tax appeal, it is not an all or nothing matter. Both the Board of Review and the Tax Tribunal are free to determine that your real property is worth less than the assessor believes it to be worth, but more than you believe it to be worth. As a result, in any tax appeal, even if successful, you may not get every dollar of reduction in the True Cash Value (and the taxes owed) that you seek. It is not unusual for the Tribunal to determine that the True Cash Value of property, for tax purposes, is somewhere between the positions of the assessor and the property owner.
Whether or not you ultimately challenge the True Cash Value and Taxable Value established by the assessor for your real property, it is a good idea to take a look at the Taxable Value established each year. Multiply it by two and determine whether or not you believe that it reasonably approximates the overall fair market value of your property. Given that each year, the Taxable Value is either increased or decreased based upon the Taxable Value established for the year before, it can be important for years in the future that you keep the current Assessed Values and Taxable Values established by the assessor reasonably close to what you believe to be one-half of your property’s True Cash Value.
In most cases, giving your real property a tax check-up early in the year involves a modest investment of time, but it is an investment that can assure your property is being properly taxed. This simple action could save you money now, and for years to come. We here at Kreis Enderle stand ready to assist you in obtaining a fair and reasonable assessment of your property and can help you obtain a tax reduction for real property that is over-valued by the assessor. This is one resolution that is worth the investment.