Post Number: 956
|Posted on Thursday, March 05, 2009 - 11:17 am: || |
i know this has almost been covered to death, but i had a quick question about property taxes now that appeal time is upon us.
it has been my understanding that the taxable value of a property is usually half of the assessed value. i've never heard about the two being equal before. is there a case where they are the same? where is this code/law listed?
[we've been in our new house for a year now and got our readjusted taxes back. they increased our taxable value to equal the assessed value. the assessed value did not change, only the taxable value. we appealed and, of course, no change. this does not seem right to me, but i don't now much about tax law to present a further appeal case.]
thanks in advance for any help.
Post Number: 1245
|Posted on Thursday, March 05, 2009 - 12:03 pm: || |
Not true. They are often the same. A common rule of thumb that you may be referencing is the idea that the market value of the home is two times the assessed value. This too however is a generalization and is certainly not concrete.
Post Number: 957
|Posted on Thursday, March 05, 2009 - 12:21 pm: || |
thanks spirit. i've come across a lot of assessed value vs. tax value in my research for clients and the rule of thumb seemed to be one is half of the other.
actually, the assessed value went down and the taxable value went up. both now are coincidentally what we paid for the house (which, of course, is nowhere near the appraised value). it all seems pretty fishy to me and i'm just trying to put together an appeal.
Post Number: 251
|Posted on Thursday, March 05, 2009 - 12:45 pm: || |
The way proposal A works is that when you purchase a property the SEV and taxable value are supposed to equal out. Then over time as the SEV continues (usually) to climb, your taxable value is limited to the rate of inflation or 3% or 5% (can't remember which), whichever is lower. That is how after many years it doesn't pay to move because you're taxable value is usually significantly lower than your SEV. Since you said this was your first year at your property, I'm wondering if they "evened it up" and now you start the process.
Post Number: 996
|Posted on Thursday, March 05, 2009 - 1:04 pm: || |
In 1954, the Michigan Supreme Court ruled that the “assessed value” of property shall be the value
placed upon the property by the local assessing officer, as equalized by the county and finally by the
state. Equalization is needed to ensure that property owners in all parts of the county or school district
pay their fair share of that unit’s taxes. Equalization provides that all similar properties are equally and
uniformly assessed and serves to ensure that a school district, city, township, or village in which property
is underassessed does not get more than its fair share of state aid. The Michigan Constitution requires
that property be assessed uniformly at a rate not to exceed 50% of true cash value. In 1965, the Michigan
Legislature set the assessment rate at 50% of true cash value, as authorized by the Constitution.
Property assessment is an annual, three-step process. First, the local assessor determines the assessed
value of property based on the condition of the property on December 31 of the previous year. Second, the
board of commissioners in each county applies an adjustment factor to the assessments of each city and
township in which assessments are above or below the required level. Third, the State Tax Commis sion
applies an adjustment factor to the assessments of a county when its assessments, after the county
adjustments, still fail to meet the required level.
Furthermore, the law also requires that the local assessor send to each owner or person or persons
listed on the assessment roll of the property a notice, by first-class mail, of an increase in the tentative
state equalized valuation (SEV) or the tentative taxable value for the year. The tentative taxable value is the
value used to calculate property taxes under the requirements of Proposal A. This notice must be sent at
least ten days before the meeting of the local board of review, and it must specify each parcel of property,
the tentative taxable value for the current year, and the taxable value for the immediately preceding year.
The notice must also include the SEV for the immediately preceding year, the tentative SEV for the current
year, the net change between the tentative SEV for the current year and the SEV for the immediately
preceding year, the classification of the property, the inflation rate for the immediately preceding year, and
a statement explaining the relationship between SEV and taxable value. The notice must also include a
reminder that, if the owner purchased the principal residence after May 1 of the prior year, the owner must
file a homeowner’s principal residence exemption claim on or before May 1.
The Michigan Constitution requires uniform assessments and because, prior to 1981, some taxing
jurisdictions had not assessed property at 50% of true cash value, counties and the state had equalized the
assess ment roll by multiplying the assessed value by a factor designed to bring the total assessed value of
all real or personal property on the roll to 50% of true cash value. In carrying out this annual equalization
process, it became apparent that among the six different classes of real property and five different classes
of personal property, which local units combined for assessment and equalization purposes, some were being
assessed at or near the 50% rate, while others were being assessed at a considerably lower rate. This meant
that when the local unit of government combined the different classes to determine what rate was needed
to bring the total assessed valuation of all property up to the prescribed 50% rate, those classes that were
already at or near it would be carrying a greater tax burden than those classes that were at a lower rate.
The process of equalization is now done separately for personal property and for each class of real
property within each of the assessing units and the counties. Therefore, if, within an assessing unit, a
particular classification of real property, such as residential, has been assessed at the proper percentage of
true cash value, no equalization factor will be necessary. The 1981 equalization process was the first year
in which the separate equalization by class was accomplished.
As a further step to encourage local assessors to assess property at 50% of its true cash value, 1981
PA 213 was enacted. This law has required a city or township, when its state equalized valuation exceeds
its assessed valuation, to reduce its maximum authorized millage rate to produce the same amount of
property tax dollars which would have been generated on the assessed valuation.
When looking at your property tax assessment, it is important to remember that property has been
assessed on the basis of its usual selling price (true cash value). For tax purposes, property has traditionally
been assessed at 50% of the true cash value and, on equalization, this resulted in the deter m i nation of the
property’s state equalized valuation (SEV). With the passage of Proposal A in March of 1994, however,
the annual increase in a property’s value for tax purposes, adjusted for all additions or losses, was capped
at the rate of inflation or 5%, whichever is less. Taxable value is now the basis for the property tax
assessment and, under 1998 PA 542, is the basis for the levy of special assessments that are levied on a
millage rate basis. Therefore, a property will have both an SEV and a taxable value. Assuming that your
property’s true cash value rises faster than the rate of inflation or 5%, whichever is less, over time the
property’s taxable value may grow at a rate that is significantly lower than the rate of growth of its SEV.
When a property is transferred, however, the following year’s SEV becomes the property’s taxable value.
A transfer of ownership occurs when a title or present interest in the property is transferred by, but not
limited to, conveyance by deed, land contract, trust, distribution under a will, and certain leases. Transfers
of property from one spouse to the other spouse or from a decedent to a surviving spouse, among other
exceptions, are not considered to be a transfer of ownership.
http://www.legislature.mi.gov/ documents/publications/taxpaye rsguide.pdf
Post Number: 958
|Posted on Thursday, March 05, 2009 - 1:42 pm: || |
thanks retroit. so, if i'm reading that correctly, what happened to me is exactly what is supposed to happen (assuming that my assessed value is roughly 50% of my appraised/true cash value)?
Post Number: 1189
|Posted on Thursday, March 05, 2009 - 2:06 pm: || |
RSA, how long had the previous owner owned the house?
What your likely seeing is the "pop-up" that occurs when you become the new owner of a house. If the previous owner had been in the house for more than a couple of years, the taxable value for the house was probably below the assessed value due to the impact of Proposal A as others have noted. When ownership changes, the value of the property is readjusted so that the taxable value matches the assessed value. Depending on the time of the year that you bought the house, you may not see this adjustment take effect until the next tax season.
Once the pop-up adjustment takes place, going forward, the values will change based on Proposal A and the overall market. In a market with increasing values, the taxable value will go up 5% or the rate of inflation, whichever is less. In a declining market, the taxable value will decline at the same amount as the decline in your assessed value.
Keep in mind that the assessed value is based on the value of your home as compared to homes in the surrounding area. If you want to challenge your assessment, you have to show that it's out of line as compared to the assessed values of surrounding properties. You're going to have a hard case to make this year that your assessed value is wrong if you were willing to pay that amount when you bought the home. You'll have a better chance next year if you can show that assessed values in the area have declined. If property values in your area continue to fall, you should see your assessed value decline next year. Since your taxable value and assessed value are equal, your taxable value will decline next year too.
Post Number: 959
|Posted on Thursday, March 05, 2009 - 2:53 pm: || |
novine; the recent history of my house is a little foggy. it was vacant for about two years before we bought it. it may have been foreclosed up the whole time, i'm not certain. before that there was a number of rentals, an absentee owner who only kept his dogs there after his mom died, and then a family before that. closest i can get to anything concrete is that it was last sold about 12 years ago.
i can understand the laws and everything, but it all just seems off to me. the appraised value was so much greater than it was now, and was so much greater than the previous taxable value. it doesn't seem to follow tha above logic.
thanks for the advice.
Post Number: 135
|Posted on Thursday, March 05, 2009 - 6:36 pm: || |
retroit - good but a bit lengthy and the layout on here made it a bit more difficult.
From what you say however homeowners have a constitutional right not to be taxed at over 50% of value. Market value is the price a willing buyer will sell to a willing seller at an arm's length transaction.
So I should be able to buy something with a replacement value of $800,000 but has been on the market at $75,000 and finally goes for $40,000 and the assessment should be $20,000
Post Number: 1193
|Posted on Thursday, March 05, 2009 - 7:47 pm: || |
"So I should be able to buy something with a replacement value of $800,000 but has been on the market at $75,000 and finally goes for $40,000 and the assessment should be $20,000
Wrong. As I just posted, assessed value is based on the value of your home as compared to homes in the surrounding area. If every home in your area sold for $40,000 then you have a case for your position. Otherwise, your personal sale is an anomaly and not a basis for a reassessment.
Post Number: 137
|Posted on Friday, March 06, 2009 - 7:34 pm: || |
Novine- Isn't this a disincentive for people to fix up their block -neighborhood? The local and national economy is bad enough - if everyone fixed up their house then the assessments would all be higher.
Some places do not tax on improvements in areas that need them.
Post Number: 1210
|Posted on Friday, March 06, 2009 - 9:27 pm: || |
"if everyone fixed up their house then the assessments would all be higher."
I'm sorry we can't rig the system so that everyone can game it for their own personal benefit. When the market was hot, people demanded that home values not reflect the actual market value so we created Proposal A to avoid people paying taxes as values went up. Now people want a system where values are less then the assessed values even when they make improvements so that they can pay less in taxes. All we're going to get is a system that people can't understand and don't think is fair.