How Property Taxes are Calculated Property Assessment What's a Mill?
Figuring Your Taxes
Personal Property Taxes and Business Owners Eligible Personal Property Tax Exemption
Tax Rate History
Property Tax Prepayment - Dec. 27, 2017
The City of Ann Arbor has received questions about
residents’ ability to prepay 2018 property taxes in light of new tax rules
passed by Congress. Although some financial experts are recommending this
approach, the practice is not legal in Michigan.
The Michigan General Property Tax Act(GPTA), MCL 211.1-157
governs the levying and collection of taxes. Prior to levying real property
taxes, assessment values must be calculated as of December 31, 2017 (Tax Day).
Assessment notices based on these values are mailed to property owners in
February 2018. Owners then have an opportunity to protest the assessment at the
March 2018 Board of Review. Property Owners may also appeal those decisions to
the Michigan Tax Tribunal. Finally, there’s an Equalization process that occurs
in April of 2018 that could affect the values upon which your 2018 taxes are
Once values are set, millage rates are levied by each taxing
authority listed on your tax bill. The forms to collect this information
are called L-4029’s and are due to the Treasurer’s Office in June of 2017.
Levied taxes are then billed July 1, 2018.
Unfortunately, there’s no lawful pre-payment option in the
General Property Tax Act for Michigan residents.
How Property Taxes are Calculated
Ann Arbor property owners receive property assessment and taxable value notification letters annually in March. The following information explains the factors involved in determining property assessments and the terminology used in this process.
Taxable value vs. assessed value
To understand how taxes are calculated, a look back at Michigan's history is in order. Until 1994, property in Michigan was assessed at half its market value for tax purposes. This is known as a property's assessed value (AV).
In 1994, Michigan voters passed Proposal A, which changed the state's constitution. Proposal A shifted some of the tax burden off of property and onto the sales tax, which rose from four ($0.04) to six ($0.06) cents on every dollar spent.
The result of this proposal was the development of a new way of calculating property taxes using what's known as a property's taxable value (TV). A property's taxable value is determined using one of the equations below (whichever one is less):
- (((Last year's taxable value) - (losses)) x (5%)) + (additions);
- (((Last year's taxable value) - (losses)) x (the rate of inflation)) + (additions).
Your taxable value cannot exceed your assessed value.
Under Proposal A, the growth of a property's taxable value is limited - or "capped" - with annual increases of not more than the lesser of 5 percent (5%) or the consumer price index (CPI), as adopted by the Michigan State Tax Commission.
Because of how taxable value is calculated, it is - in many cases - less than a property's assessed value. However, when a piece of property is sold or ownership is transferred, the property's taxable value becomes equal to the amount of its assessed value for the tax year following the year in which the sale or transfer took place. This is called "uncapping" a property's taxable value. After this has taken place, the lesser of 5 percent (5%) or the CPI applies to future increases in taxable value, until there is another sale or transfer of ownership of the property.
The taxable value for parcels in the City of Ann Arbor can be found on the parcel owner's annual tax bill or assessment change notice.
Even though taxes are based on taxable value, the assessed value is still calculated each year so that property values can be uniformly assessed at 50 percent of market value, as required by the Michigan Constitution.
The City of Ann Arbor Assessor's Office annually assesses each property within the city using mass appraisal techniques. This involves studies and analysis of the local real estate market.
The city assessor also considers new construction, improvements to property (such as remodeling and additions), and demolition of structures when calculating additions and/or losses to property values.
What's a Mill?
The property tax rate in Michigan is referred to as a millage, and it's figured in mills. One mill is equal to 1/1,000 of a dollar. Or, more simply, for every $1,000 in taxable value, a property owner will pay $1 in property tax.
Figuring Your Taxes
Property owners can calculate their tax bill by multiplying their taxable value by the millage rate.
For example, if the city's millage rate is 10 mills, property taxes on a home with a taxable value of $50,000 would be $500. The mathematical equation below illustrates how this is figured:
(10/1,000) x $50,000 = $500
In addition to levying property taxes, the City of Ann Arbor levies an administration fee pursuant to
state law. This fee is based upon the amount of property tax paid and is limited to 1 percent. This helps cover the city's costs to determine and defend annual assessments and collect taxes for all taxing authorities.
To figure the amount due in administration fees on a home with a taxable value of $50,000, see the following example:
$500 property taxes x 0.01 = $5.00
Total taxes due
In the example above, the administration fee of $5 added to $500 in property tax would equal a total of $505 owed.
Personal Property Taxes and Business Owners
When a business closes
In the event a business closes, the business owner is still responsible for paying taxes for that year. For example, if the business owner had personal property in Ann Arbor on Dec. 31, 2016, he or she is responsible for the 2017 summer and winter taxes.
To avoid paying personal property taxes for that business in future years, the business owner must take actions to delete the business from the city's tax roll. To do this, the business owner must provide written notification to the city's assessor's office and contact the city's treasurer's office to obtain a final bill.
No new equipment purchases
To avoid paying personal property taxes when they have not purchased any new equipment in the past two years, business owners must file a personal property statement with the city assessor's office.
If a business owner tranfers ownership of the property, the tax liability transfers to the buyer, unless otherwise agreed to by the two parties. If the buyer purchases the equipment and has possession of it when taxes become delinquent (March 1), the city pursues collection by seizing the property from the buyer (the current owner). Therefore, if the business owner needs to know the amount of taxes due for the current year before selling, he or she should call the city assessor's office at 734.794.6530 to have a jeopardy assessment calculated. There is no proration of personal property taxes.
Eligible Personal Property Tax Exemption
In December of 2012, Governor Snyder signed into law 11 bills affecting the taxation of personal property. The majority of these Acts did not take effect until Dec. 31, 2015, for the 2016 Tax Year; further guidance on those Acts will be provided at a later date.
Read the bulletin in its entirety.
Tax Rate History
Property taxes are calculated by multiplying the taxable value of a property by the millage rate (tax rate). A mill is the rate local governments use to levy property taxes; it equals $1 of tax per $1,000 of taxable value. Each taxing unit establishes their own tax rate; the city does not determine tax rates for the other local taxing units, i.e., schools, county, etc.