What is taxable value?
In 1994, Michigan voters approved the constitutional amendment known as Proposal A. A term known as “Taxable Value” was created as a part of this legislation. Before the enactment of Proposal A, some homeowners were being taxed out of their homes because the value of their home was rising so quickly. The intent of Proposal A was to contain or limit how fast the value used to calculate taxes could increase in any given year and this created what is known as taxable value. Now with Proposal A, your taxable value is only allowed to increase by the rate of inflation or 5%, whichever is less. Since 1994 and the enactment of Proposal A, in many parts of the State, housing values have been increasing much higher than 5% annually. The good news about Proposal A is that even if your home value went up 10%, your taxable value could only go up 5%. The affect of this was to contain or control how much you are paying in property taxes from year to year. Since 1994, the highest rate of inflation use
Part of the new law that was approved by voters in 1994 (Proposal A) says that for the assessment year after the sale, which is what we call a transfer of ownership, the taxable value has to “catch up” to the assessed value. We refer to this as “un-capping” the taxable value. Because it has been 10 years since the law took effect, there is a very big difference between taxable value and assessed value for many properties. After the initial year of “catching up”, the taxable value is limited again by the capped formula.
Taxable value is a percentage of the assessor’s appraisal(true and full value) according to a state-prescribed formula, after any exemptions are removed. • An assessment ratio of 50% is multiplied by the true and full value this equals the assessed value. • Then, the assessed value is multiplied by 9% for residential and 10% for all other property classes this equals the taxable value. • The taxable value of residential property is 4.5% of the true and full value; for commercial and agricultural property, it is 5% of the true and full value. • To calculate annual taxes for a property, the taxable value is multiplied by the mill levy.
