What NO ONE Tells You About Michigan Property Taxes – MiHomesByAndrew

What NO ONE Tells You About Michigan Property Taxes

So you’re thinking about making the move to southeast Michigan, but a concern of yours are the property taxes (as it should be), and when you look at other online resources, it doesn’t really give you the answer you’re looking for. So with that being said, be sure to stick around, because I’m going to chat about how property taxes in Michigan are structured, and tackle the top 10 worst cities in southeast Michigan with the WORST property taxes.

Just to put a little more perspective on this topic, I’ll turn to the Citizens research council of Michigan, where they touch on Michigan’s property tax burden and how it has drastically changed over time. Property taxes represent a HUGE tax burden to residents not only in Michigan, but the U.S in general as it becomes a local municipalities main source of local tax revenue.

I have seen several comments over the last few years on my videos about how high Michigan property taxes are, but historically speaking, they were well above the national average in 1978 and as of 2018, they have fallen below the national average. I know property taxes in general are something we as residents of our states love to hate, and they represent such a huge financial burden to us year after year despite the multiple tax limitations that have been put in place. Unfortunately, we can’t bake the cake and eat it too. Meaning, we can’t complain about wanting our city perfect when we also complain about paying taxes. Local governments in Michigan depend heavily on property taxes to do anything around our local municipalities. 

MICHIGAN PROPERTY TAXES

Just to put Michigan’s property taxes in better perspective, the tax foundation ranked Michigan as having the 13th highest property taxes in 2020 with an effective tax rate of 1.44% of a home’s value. Wallethub ranked Michigan #38th on their list in 2021, that was pulled from the 2019 census, so you might see fluctuations between rankings on several different reports. The highest state on this list was New Jersey at 2.21% and the lowest was Hawaii at 0.30% which was the case across several sources’ rankings.. It’s no secret that Michigan property taxes were a heavy burden on Michiganders, but prior to the 1990’s they were much worse prior to the adoption of proposal A. Proposal A essentially created this modified acquisition value system for determining the taxable value of a property. 

PROPOSAL A

So prior to the adoption of proposal A, property values in terms of taxation fluctuated very frequently, and I’m sure a lot of homeowners prior to the 90’s can remember how all over the place it really was. Growth in taxable value became limited to inflation unless the home was sold, at that point it would revert back to the home’s market value. So when your Realtor or tax provider tells you when you are house hunting that the displayed tax amount isn’t what you’ll be paying, I’ll break down why that is. Think about it for a moment, let’s say a homeowner purchased a home 20 years ago for $75,000, since proposal A increases the property tax based on inflation, the taxes would stay relatively low based on purchasing the home for $75,000, but let’s say they turn around and sell it for $300,000. You’d be paying taxes based on $300,000, not the same property tax structure the previous owner had with the $75,000 home. That’s why it’s crucial to have a good mortgage lender to break down your tax rate ahead of time during the pre-approval stage, so you don’t have any surprises later down the road. 

This proposal also changed the way that schools would be funded, and by doing so actually reduced the tax burden quite a bit, but in retrospect, it’s important to note that this reduced the tax burden for local taxes, which then increased the state taxes to fund schools.

MICHIGAN TAX BURDEN

Taking a look at this chart for Michigan’s tax burden between 1978 to 2018, it went from 33.1% down to 24.7% in 2018. You can also see the other columns progressively decline, except for the property taxes per capita in the United states, as inflation starts to rise and the cost of living continues to rise, this progression is to be expected. 

Stepping over to a chart provided by the Michigan department of treasury, you can see how taxable value and state average tax rates have adjusted from 1978 to 2020. The tan line on this chart represents the taxable value, which grows much slower than the market value.

Now taking a look at the second chart here showing Michigan’s non-school local property tax levy as a percent of personal income provided by the U,S bureau of economic analysis, and see how it has decreased steadily since the 2008 recession. 

After looking at all these charts and graphs, we can of course draw a few different conclusions based on what the data shows. The biggest one for example, is the tax burden remaining fairly stable even with the limitations instituted by proposal A. Even years following the adoption of proposal A, 1994 clearly shows that there wasn’t a true change in the burden pertaining to income, which would make it clear as day that something else deserves the finger pointing. 

Secondly, since 1994, Michigan property taxes have contributed less to government funding than they do nationally, so it’s clear the tax burden in the mitten state is less than the national average.

And last but not least, thirdly, the first chart we looked at shows a steady increase in the AVERAGE tax rate from 1995 to the year 2020. 

Prior to jumping over to the Top 10 Cities In Southeast Michigan With The WORST Property Taxes, I want to provide you an example of how they are calculated, so you’re able to do that due diligence when searching for a new home in Michigan. When looking at the city, township or county websites, you can find what the millage rate is. For those of you that don’t know what a millage rate is or how it’s used to calculate property taxes, I’m going to provide this example from a video I made about living In Northville to break it down for you

I hope that example helps you break down how to quickly calculate property taxes in Michigan. I want to throw a quick disclaimer out that I am in no way a tax person or attorney by any means, all this is based on experience and facts provided by approved government resources. 

TAXABLE VALUE VS. MARKET VALUE

Before jumping into this list I also want to define what taxable value and market value is, so the figures I tell you actually make sense. Since I know a lot of sources just assume you know. It can get extremely confusing, because a city includes SEV or state equalized value and taxable value on their tax assessments. The SEV would represent 50% of a home’s true cash value, but just doubling this figure won’t necessarily give you the true value, so when listing your home don’t do that. Let it be a starting point, because these simple valuations don’t keep in mind the things you’ve done to your home, and the comparable homes that are selling currently in your market. SEV is calculated by a study of properties within 2-3 years from what I have been told, that’s why it lacks accuracy. Taxable value is simply the value on which property taxes are calculated. There’s a few things that go into calculating these taxes, so the results/the name for it, is taxable value. Then on the other hand, market value is how much a home would sell in a competitive open market between buyer and seller.  

CITIES WITH THE WORST PROPERTY TAXES IN MICHIGAN

#10 – Detroit

Starting this list off, based on the 2019 census, coming in at #10, for cities with the highest property taxes in southeast Michigan, is Detroit. Detroit levied 69.6 mills. So looking back at the Northville example being just over 30 mills, imagine doubling that and then some. Granted, Northville’s home prices are MUCH higher than Detroit’s. The average taxable value for parcels at that time was $6,646 and the median market value was just over $45,000. With that in mind, the median property tax bill was about $1,438.

#9 – EASTPOINTE

Stepping over to number 9 on this list, we have Eastpointe. Most people know where Detroit is, but for those of you that don’t know where Eastpointe is, it’s northeast of Detroit between St. Clair shores and Grosse pointe woods. The city of Eastpointe levied 69.8 mills, whereas the homes in the south lake school district levied 65.2 mills for Eastpointe schools. The average taxable value for a parcel was around $28,000, with a median market value of $69,100 and a median tax bill of over $1,800. So if you’re wanting/needing to live in the Eastpointe area, keep these two locations in mind so you can save some money on your taxes. 

#8 – ROYAL OAK TOWNSHIP

Moving on over to number 8 on this list, we have Royal oak township. Royal Oak, located near Birmingham and Ferndale levied 77.4 mills for the homes in the Oak Park school district and 73.6 mills in the Ferndale school district. The average taxable value came out to be $13,190 on residential parcels, and a median market value of $64,100, with a median property tax bill of over $1,371. Keep in mind this is the township of Royal Oak, not the city.

#7 – HAZEL PARK

Next on this list coming in at number 7, is Hazel park. Between Ferndale and center line, levies 74.6 mills in the hazel park school district, with an average taxable value coming in at just over $18,000. The median market value is $61,100 with a median tax bill of over $1,650.

#6 – CENTER LINE

Moving to number 6 on the list, we have Center line, directly east of Hazel park. This city levied 77.2 mills for the homes in the center line school district and 65.3 mills in the van dyke school district. The average taxable value came out to be $29,834, with a median market value of $72,600 and a tax bill of almost $2,300.

#5 – INKSTER

Halfway through this list, coming in at number 5 is Inkster. The city of Inkster levied 78.4 mills for the homes in the Romulus school district and 64.1 mills for the homes in the Westwood school district. This city averaged a taxable value of $14,930 for residential parcels, with a median market value of $47,000 with a median property tax bill of $1,671. As you can assume by looking at half the list so far the property taxes are highest in the areas with lower home values, so the government can actually get the revenue needed to pay for resident services. Otherwise, if the poetry tax rate was the same across the board, it would be very minimal based on property values. That raises an interesting question, do you think property taxes should be the same across the board, the lower end areas paying less and the higher end places paying more? Drop your thoughts in the comments below!

#4 – HIGHLAND PARK

Stepping over to number 4 on the list, we have Highland park. Highland park is south of Ferndale and Hazel park, near Hamtramck. This city levied 78.4 mills, with an average taxable value of just over $9,000. The city had a median home market value of $33,700 and a median property tax bill of $1,241.

#3 – RIVER ROUGE

Transitioning into the top 3 on the list of highest property taxes in southeast Michigan, we have number 3, River Rouge. River Rouge is located down river from Detroit, north of Ecorse. River Rouge had a tax rate of 82 mills with an average taxable value of $11,578, and a median market value of just over $34,000. The median property tax bill came in at $1,628.

#2 – HARPER WOODS

Moving on over to number 2 on the list we have Harper Woods. Harper Woods is located south of Eastpointe, near Grosse Pointe woods. The tax rate for homes in the harper woods school district was 83.1 and 81.9 for homes in the Grosse pointe school district. The average taxable value for a residential parcel was $27,304, with a median market value of $76,100 and an average property tax bill of $2,610.

#1 – ECORSE

Coming in at number one on this list for highest property taxes in southeast Michigan is Ecorse, Ecorse is located downriver just south of River Rogue. This city had a tax rate of 111.5 mills for homes in the Ecorse school district and 111 mills for homes in the river rouge school district. The average taxable value came out to $11,264 with a median market value of $40,500 and a median tax bill of $1,488. 

Moral of the story, when you’re looking for a new home in Michigan, be conscientious of the property taxes, because as you could see from this list of cities in southeast Michigan, a lot of them were right next to each other and drastically higher or lower than it’s neighbor. Knowing this information now will allow you to seek a home on the border of these cities but take full advantage of an area without paying the taxes to live there. 

If you have any further questions about living in Michigan, don’t hesitate to reach out. There have been several of you that have reached out just to talk through your situations and where your thought process is, so please don’t hesitate.

Cheers,

Andrew McManamon is a Michigan REALTOR® with Signature Sotheby’s International Realty and provides real estate services to Buyers, Sellers and Investors throughout SE Michigan including Livingston County, Oakland County, Washtenaw County, Genesee County & beyond. Andrew has become one of the rising stars of Michigan real estate agents. Prior to his real estate career Andrew was responsible for managing a senior living facility in Brighton, Michigan as a dining supervisor and an activities assistant. Andrew’s passion to help people is unlike any other, and he continues to strive to be best resource he can be. Andrew graduated from Cleary University in Howell, Michigan with a double major and currently resides in White Lake, Michigan.

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