Quick Summary

I just saw a new housing report and it highlights somehting many homeowners discover the hard way.

When a home sells in Michigan, the property taxes often jump significantly the following year.

Why? Because Michigan’s property tax system resets after a sale — you will often here this referred to as “uncapping” the property taxes.

Understanding the tax rules ahead of time can help homeowners avoid surprises.

Why This Matters

First – How Michigan Property Taxes Work

Michigan property taxes follow two key rules created by the Headlee Amendment and Proposal A.

These rules were designed to protect long-time homeowners from large tax increases.

Annual Tax Increases Are Limited

Each year, the taxable value of a home can only increase by the inflation rate or 5%, whichever is lower.

The increase was 3.1% for 2025 because that was the inflation rate, and it was less than the 5% maximum allowed by the rule.

This means if you stay in your home for many years, your taxes may grow much more slowly than your home’s market value.

But Everything Changes When a Home Sells

When a property sells:

  • The previous tax cap disappears

  • The taxable value resets

  • The new taxable value becomes the State Equalized Value (SEV)

The SEV is roughly 50% of the home’s market value.

That reset usually causes the new owner’s property taxes to increase dramatically compared to the seller’s taxes.

That’s why two identical houses on the same street can have very different property tax bills.

The neighbor who has owned the home for 20 years is still protected by the tax cap.

The new buyer is not.

Note that there are limited exceptions to uncapping (for example, adding a spouse to your deed, transferring your home to a “close family member”, and more).

The rules are detailed in the Transfer Ownership Guidelines on the State of Michigan’s website.

Appealing Property Taxes

Each February homeowners receive a Notice of Assessment.

When deciding whether to appeal, the key question is simple:  Is the SEV about 50% of the true market value of the home?

If it is not, homeowners may want to appeal to the Board of Review.

Here is a link to learn how to file a property tax appeal in Michigan:  Property Tax Appeals in Michigan

By the way, what your neighbors pay in property taxes is not relevant when filing an appeal. The only issue is whether the assessed value of your property accurately reflects its true market value.

Simple Lesson

Michigan’s property tax system rewards long-term homeowners.

But when a home sells, the taxes may come “uncapped” and the property taxes reset.

That’s why buyers often see a large tax increase the year after they purchase a home.

Understanding this rule can prevent unpleasant surprises.

Action Step

If you recently purchased a home — or plan to buy one soon — make sure you:

  • Estimate next year’s taxes using the SEV and local millage rate.  Here is a helpful link:  Michigan Property Tax Estimator

  • Do not rely on the previous owner’s tax bill

  • Review your Notice of Assessment when it arrives in February

A quick review can sometimes save thousands in property taxes.

A Quick Note About The Local Housing Market

Based on the housing report I reviewed, the housing market here in Livingston County is still active, but the numbers suggest a few shifts worth noting.

I’ll be the first to admit that I’m not the real estate expert when it comes to buying and selling homes. But looking at the recent data, home prices appear to have stayed fairly steady compared to last year.

What does seem to be changing is inventory.

There simply aren’t as many homes coming onto the market right now, which keeps the overall supply tight. That appears to be especially true for homes in the lower price ranges.

Of course, if you’re thinking about buying or selling real estate, I wouldn’t rely on my observations alone.

For real guidance on what your home might be worth—or what’s really happening in the local market—I highly recommend talking with Lisa Tam and her wonderful group at The Tam Team Realtors.

Lisa and her team are simply the best.

Questions?

As always, if you have questions about how your home fits into your estate plan, we’re happy to help.

Call us at (517) 548-7400 or visit www.michiganestateplans.com

Planning ahead today can save your family stress and expense tomorrow.