Real property tax is a type of taxation imposed on property owners, including homeowners. If you have purchased a home in Michigan, the government will assess its value and tax you accordingly.
As a homeowner, it is crucial that you know how property taxes are calculated. While federal income tax brackets are based on your filing status and remain consistent across the country, real property taxes vary from state to state.
Michigan real property taxes are calculated differently compared to other states, and even the property tax rates will depend on the county in which you live.
This article provides a comprehensive guide on property taxes in Oakland County to help you understand how your home will be assessed and taxed, exemptions you may apply for, and actions you can take if you find any discrepancies in your tax assessment.
The Fundamentals of Property Tax in Michigan
Michigan has an effective property tax rate of 1.35%, which is higher than the nationwide average of 0.90%.
Oakland County property taxes are lower than other counties in the state but are relatively high by national standards at an effective property tax rate of 1.36%. In dollar terms, the median annual real estate tax payment in the county is $4,124.
Property taxes are referred to as a millage or mill. Oakland County millage rates are equal to 1/1,000 of a dollar. This means that for every $1,000 in taxable value, a property owner will pay $1 in property tax.
It is important for homeowners in Oakland County to review their annual property assessment notices carefully and understand the calculations that determine their tax obligations to better manage their property tax expenses.
Key Exemptions and Reductions
The Michigan Department of Treasury offers exemption programs to help homeowners manage their property tax burden. These programs vary, so homeowners are encouraged to review the requirements and submit necessary documentation promptly.
Principal Residence Exemption (PRE)
The Principal Residence Exemption (PRE) exempts a residential property from the tax levied by a local school district for school operating purposes up to 18 mills.
To qualify for this exemption, the property must be:
- Owned by a qualified owner as defined by MCL 211.7dd(a)
- Occupied as a principal residence by the owner of the property
- None of the disqualifying factors listed in MCL 211.7cc(3) applies
- Claimed by the owner of the property by filing an affidavit with the local tax collecting unit in which the property is located
Disabled Veterans Exemption
This property tax exemption applies to veterans who have been qualified as 100% totally and permanently disabled due to a service-related disability and those who are less than 100% disabled but compensated at the 100% rate due to Individual Unemployability.
To qualify, a veteran must apply with the Oakland County tax assessor’s office beginning January 1 of the current year. Application forms are also available online.
Poverty Exemption
A person whose financial situation prevents them from being able to pay the property taxes on his/her home may apply for this exemption.
To be eligible for the poverty exemption, a person must:
- Own and occupy the principal residence for which the exemption is requested
- Show proof of ownership
- File a claim (annually) with the assessor or board of review on the city’s form
- Meet federal poverty income standards annually determined by the U.S. Department of Health and Human Services and adopted by the City of Royal Oak
The Property Assessment and Appeal Process
Prior to 1994, properties in Michigan were assessed at half their market value for tax purposes. This is called the assessed value.
However, in 1994, Proposal A was passed, shifting some of the tax burden off of property and onto the sales tax. This proposal led to a new way of calculating property taxes using a property’s taxable value.
Under Proposal A, the growth of a property’s taxable value is limited, or “capped,” and can increase by no more than 5% from one year to the next. This protects homeowners from significant swings in their property taxes.
When reviewing the property tax assessment, it is crucial for homeowners to understand the assessor’s notes outlining the reason for the change to the property taxes for the year.
Most assessments include a summary of the changes that outlines the difference in the assessed and taxable value from the prior year to the current year. Property owners should check this summary before contacting legal counsel or filing an appeal.
An appeal might be warranted if there is significant discrepancy in property value. The assessed value for a property is based on sales of similar properties over the last one to two years, making it susceptible to rapid changes in the housing market.
If the assessed value of your property is significantly higher than its true market value, an appeal may be a viable option to correct the assessed value.
If you’ve made significant improvements to your property that enhance its value but the tax assessment does not reflect these changes, filing for an appeal would be necessary to have your property’s value represented accurately.
Lastly, if there is an excessive increase in your property tax compared to previous years or to similar properties in your area, you may want to dispute the assessment.
How to Appeal Your Property Taxes
The appeal process for property taxes in Michigan involves the following steps:
- Review Your Assessment Notice
The notice of assessment is sent to you by your local municipality every February. Review this notice carefully to ensure the accuracy of the assessed value.
- Gather Evidence
To support your appeal, you will need to gather these documents:
- Comparable sales data: A list showing the sales prices of similar homes in your area.
- Professional appraisal: An appraisal performed by a real estate professional.
- Records showing inaccurate information: Documents that show errors in the assessor’s data.
- File an Appeal with the Board of Review
The Board of Review in each municipality typically meets in March. You’ll need to file a petition and schedule an appointment to present your case before filing an appeal to the Michigan Tax Tribunal.
- Appeal to the Michigan Tax Tribunal
If the Board of Review doesn’t rule in your favor, the next step is to file an appeal to the Michigan Tax Tribunal by July 31 of the tax year. The Tax Tribunal may not hear your appeal until the following year.
Conclusion
As a homeowner, it is important that you know how your property taxes are calculated. We hope that through this article, you have gained a better understanding of property taxes in Oakland County.
If you have any questions, please feel free to give us a call at 248-780-0942. Our team is here to provide you with the appropriate assistance.
Frequently Asked Questions
How are property taxes calculated in Oakland County, MI?
Property taxes are referred to as a millage or mill. In Oakland County, a property owner pays $1 in property tax for every $1,000 in taxable value.
What is the difference between Assessed Value (SEV) and Taxable Value?
Prior to 1994, properties in Michigan were assessed at half their market value for tax purposes. This is called the assessed value. After Proposal A was passed in 1994, property taxes were calculated using a property’s taxable value.
What is the Principal Residence Exemption in Michigan?
The Principal Residence Exemption (PRE) exempts a residential property from the tax levied by a local school district for school operating purposes up to 18 mills.
