Property Assessment and Taxable Value
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Understanding Your Property Assessment and Taxable Value
The following are answers to some frequently asked questions regarding the assessment process:
I just bought my property, why isn’t my Assessed Value exactly half of the sales price?
Assessments are 50% of the usual selling price of the property. The Michigan Legislature and the Michigan Supreme Court have clearly stated that the actual sales price of a property is not the only controlling factor in determining the True Cash Value calculated by the assessing officer. The local assessor must analyze the sales in each neighborhood to arrive at a uniform and equitable assessment for all properties.
This is very similar to the process that is required when you buy a property and want the bank to lend you the money. The bank requires an appraisal to determine the usual selling price and verify that your purchase price is reasonable.
Are financial institution sales used in the sales study?
Normally, sales that involve mortgage foreclosures and sales from relocation companies (Distressed Sales) are not considered typical sales and are not used to determine the value of property in the assessment process. The State Tax Commission has allowed the use of these sales in this declining market, but only under strict conditions. In part, they must be in the same physical condition as when they were assessed (normal maintenance). The City of Taylor has researched these distressed sales during this time period and has used the ones that fall within the Commission’s requirements.
Current real estate listings are not used in determining true cash value of properties.
How can my Taxable Value go up when my Assessed Value stays the same or goes down?
The City of Taylor knows this is an area of great concern to our taxpayers. Assessments are a function of property value and property taxes are calculated on your taxable value. In 1994 Proposal A required property taxes be calculated based on the Taxable Value not the Assessed Value. By law, Taxable Values are annually increased or decreased each year by the CPI (Consumer Price Index) or 5% whichever is lower; unless there are physical changes to the property or a transfer of ownership occurred.
During the 1990s and early 2000s, property values greatly exceeded the annual CPI. This has created a gap between the assessed and taxable values. Property taxes will continue to rise until the taxable value is equal to the assessed value. It is possible for your assessed value to decrease and your taxable value to increase until they are equal. Proposal A does not permit the taxable value to ever be higher than the assessed value.
The local assessor does not have any authority to change this provision of Proposal A since it a constitutional requirement.
The following examples illustrate how the taxable value changes independently of the assessed value. The examples will assume no physical changes have been made to the properties.
Example 1. If a homeowner has owned their home since the passing of Proposal A in 1994, they could receive an assessment notice with values as follows:
Assessed Value Taxable Value
Previous Year $80,000 $40,000
Current Year $80,000 $40,960 (previous year taxable value multiplied by the inflation rate)
The example above shows the assessed value can remain the same, while taxable value increases due to an increase in the inflation rate. This is a function of Proposal A. Taxable value will increase or decrease from year-to-year, by the inflation rate, until it reaches the assessed value.
Example 2. When the calculation of the taxable value would exceed the assessed value, state law mandates the assessed value become the taxable value. The following example is illustrated:
Assessed Value Taxable Value
Previous Year $80,000 $77,000
Current Year $70,000 $70,000
In the above example, the previous year taxable value of $77,000 would increase to $78,848 after the inflation rate is applied. However, since the current year assessed value is only $70,000, Proposal A requires that taxable value cannot exceed assessed value.
To appeal your assessed value, come to the Assessor’s Office at City Hall, review your property record card and all area sales, and if you feel the need, schedule an appointment. You must be prepared to provide evidence to the Board of Review to support your contention that your property does not have a market value equal to twice the assessed value. “My taxes are too high”, is not considered a valid argument. Your appointment is limited to 10 minutes.
Appointments before the Board of Review are required to be made. Written appeals are accepted by the Board of Review and should have supporting evidence included in your appeal.