Real Estate Tax Appeals in Michigan

Michigan property owners are receiving annual real estate tax assessment notices, and some are feeling sticker shock. If your assessment looks unreasonably high, you might wonder if you can appeal it. The State of Michigan does have a property tax appeal process. But before you go down that road, it may help you to understand how the state calculates taxes and why recent increases have been especially high.

How the State of Michigan Taxes Real Property

Michigan real estate tax rates are calculated in “mills.” A mill equals $1 per $1,000 of taxable value. Local governments set their own millage rates except for a six-mill State Education Tax. Property owners may be entitled to various exemptions, depending on the property’s classification. This means that amounts paid as a percentage of value (also known as the effective tax rate) can vary significantly from county to county and property to property.

Taxes are based on a property’s “assessed” value, equal to half the market value. Local assessors estimate market value by looking at recent sales of homes in the same neighborhood (“comparables” or “comps”) and adjusting for things like age, size, and other features. Valuations are made using historical sales information, which can lag behind actual market conditions.

When someone purchases a new home, the assessed value and the taxable value are the same. After that, increases in taxable value are limited under the Michigan State Constitution to 5% or the level of inflation, whichever is lower. The taxable value can never be higher than the assessed value.

For many years, inflation was very low, and increases in taxable value were also small. In 2021, however, inflation began to soar. Property tax increases for 2023 are based on inflation rates from October 2020 through September 2021. Not surprisingly, the inflation level exceeded the 5% cap for the first time since the cap took effect in 1995.

Appealing a Property Tax Assessment

Inflation is causing misery for many people, but unfortunately, that is not enough to support a property tax appeal. If you think your assessment is correct but cannot afford to pay your taxes, you can look into avenues of relief such as the Homestead Property Tax Credit or the Poverty Exemption. However, if you believe there is a mistake in your assessment, consider an appeal.

The first step is to review your assessment for accuracy. Errors in details, such as the square footage of the home, number of rooms, or property acreage, occasionally happen. You can review your property record card at the Assessor’s Office. This document has the official description of your property.

An appeal could be worthwhile if you find an error or believe your property’s taxable value is more than half its market value. You will need to act quickly. Local boards of review generally meet in early to mid-March. While commercial or industrial property owners can bypass this level and appeal directly to the Michigan Tax Tribunal during the summer, residential property owners do not have this option.

Here is the usual step-by-step process.

• Contact your local assessor. Your Notice of Assessment will include information about who to contact regarding taxable valuations and property classifications. Assessors can correct simple mistakes on their own.
• Appeal to the Board of Review. Your Notice of Assessment should include meeting dates and other information. Read this carefully. Call the contact number to verify dates and ask questions about how to prepare.
  You will need evidence to support your appeal. Compile your list of comps. Pay attention to differences like age, lot size, number of rooms, and features (swimming pools, garages, etc.). Be ready to explain why your comps are more accurate than those the assessor offers.
  Other evidence may be helpful, depending on your situation. If your home needs expensive repairs, document the damage and submit estimates and photographs. A professional appraisal can be beneficial but be careful not to spend more for an appraisal than you might receive in a tax reduction.
• Appeal to the Michigan Tax Tribunal. The Board of Review should notify you of its decision within a few weeks. If you are unsatisfied with the result, you can appeal to the Michigan Tax Tribunal. You will need to file a petition to initiate a Small Claims appeal. Completing the correct forms and complying with all applicable rules is essential.

If you have questions about your property tax assessment or your options for appeal, please contact Sara Fazio or one of the attorneys in Kreis Enderle’s Real Estate practice group.