When searching Michigan homes for sale tax rates are an important factor.  Whether you are searching Livonia Real Estate, Plymouth Real Estate or any Metro Detroit Home understanding your taxes and what they may go up to is important to you.

People are generally confused when they get their tax statements or trying to figure out mileage rates

      Mileage rates are different for each city and even different within that city because of different school systems inside that city.   For example Dearborn Heights has six different school systems inside the city.  Six different millage rates.   So according to what city you live in, where you live within that city, and what school system your kids will go to will determine your mileage rate.  Canton has one school system and one mileage rate, Brighton Township has 3, Livonia has 2.

      There is a winter mileage rate and a summer mileage rate. They usually call winter taxes city taxes and summer taxes county taxes.  There are different assessments on your property that add up to your winter and summer rate.  For example a portion goes to the county (for the different county projects and maintenance of county buildings and roads.  A portion goes to the school system, some may go to the library, some may go to roads, some may go to different projects the city is funding, etc, etc3;.  Remember when you voted last time and you voted for or against a tax increase for the schools.   Well that would have increased the mileage rate.   To impose a higher rate some of them are voted on, some do not have to be voted on.

        There are 2 numbers you need to know when figuring out your taxes.  One is SEV, which means state equalized value.  The assessor estimates what your house is worth.  SEV is normally determined by your city or township assessor.  (I will get into how to fight a bad SEV)  It is 50% of what they believe the house is worth.  For example if the assessor thought your house is worth $250,000 then your SEV will be 125,000

        The second is taxable value. Proposal A of 1994 changed the way taxes were determined.  Instead of increasing taxes based on 50% of actual cash value, commonly referred as SEV (state equalized value) now after the first year you buy a home property taxes are based on taxable value.  If a property is not acquired during that tax year then the increases in taxable value are limited to the lesser of five percent or inflation.  So boiling that down in English the first year you buy a home the taxes are based on SEV.  The second year the taxable value is SEV plus the lesser of five percent or inflation.  Remember inflation on the house can be negative so sometimes taxable value and SEV can go down.

       The first year you are taxed on the SEV value and then from then on you are taxed on the taxable value.

       In a market where property values are rising SEV becomes less and less important to you after the first year because the taxable value should be less than the SEV.  Usually when you are buying a house you will notice that if somebody has lived in the house a long time the taxable value is much lower than the SEV.  That is because of Proposal A limits the increase in taxes per year.  The estimated market value according to the state has risen faster than the taxable value.  Proposal A saved us money!

       .  However if values fall as they are now the assessor should lower the SEV. (they should but they don´t always do it because the city loses tax revenues).   Let´s say you bought it for  $300,000 in 2005, then the SEV was $150,000 (by coincidence) in 2005.  The assessor may say that the house is now worth 145,800 now so your taxes will go down in 2006.   So let´s say you bought the home in 2005 at the peak of the housing market.  Now two years later your house is worth less.  It should reflect that in your SEV and taxable value.  They both should have gone down.

       The way you have to fight it is first get your facts.  You need houses that have sold in the neighborhood and in the city that are comparable to yours.  I.E.  roughly same square footage, roughly same age, same style.  They need to have sold for less than what your bought yours for and what your taxable value is.  You need more than one house to support your claim.  The more houses you have and the closer they are to your home the better chance you have of getting the assessor to agree with you and reduce your taxable value.  Then you have to call the assessor´s office and find out the procedure to protest your taxes.  Sometimes you can only do it once a year, sometimes you have to put it in writing, sometimes you have to go in front of a board.

      It is worth the hassle!  It will save you money for years to come when you get it corrected. 

     Want to figure out what your taxes are going to be?  Here is the formula :

Fair market value as determined by assessor divided in half = SEV

SEV X Millage rate = taxes 

For example you are buying a $400,000 house in Brighton.  Lets assume by coincidence that the assessor determined the fair market value is $400,000 also.  Then  SEV is ½ of the assessor´s fair market value.  So SEV is $200,000

$200,000 X .0361558 = $7,231.16 a year in taxes.

Remember the SEV can be more or less than the asking price or price that you offer.  After you buy the home then you can fight the assessor or tax board to lower the SEV.

Remember this is only for homesteaded taxes. A person who owns and occupies a home as their principal residence may use a homestead exemption, now known as a principal residence exemption. If this is true, the person may claim an exemption from the 18 mills levied by local school districts for operating purposes.  Again in English - Homesteaded taxes are a reduction in taxes based on that you use a home for your primary residence.

So Non-homesteaded taxes are on vacation homes, rental properties, and investment properties.