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Buying a home is exciting, but it’s also a big financial step. One cost that often surprises new homeowners is property taxes. Property taxes in Michigan can vary a lot depending on where you buy, the value of your home, and how the taxes are calculated. If you don’t plan for them, you might find yourself with a bill that feels bigger than expected.
In this guide, we’ll break down how property taxes work in Michigan, why they matter when buying a home, and what you should know before closing. Think of this as your go-to roadmap for understanding property taxes in simple terms.
What Are Property Taxes?
Property taxes are local taxes that homeowners pay each year. The money goes to fund important services in your community like:
- Public schools
- Police and fire departments
- Roads and street repairs
- Libraries and parks
When you buy a home, you’re agreeing to pay property taxes for as long as you own it. Unlike a one-time fee, property taxes are ongoing costs—just like utilities or insurance.
In Michigan, your property tax bill is based on two main numbers:
- Taxable Value (TV): The value used to figure out your property taxes.
- Millage Rate: The rate your local city, township, or county sets to decide how much you’ll pay.
How Are Property Taxes Calculated in Michigan?
Michigan has a specific way of figuring out your property tax bill:
- Taxable Value: This is usually about half of your home’s market value.
- Millage Rate: This is the local tax rate set by your city, township, or school district.
- Principal Residence Exemption (PRE): If the home is your primary residence, you can claim this exemption and pay fewer taxes (since you won’t be paying school operating taxes).
Formula: Taxable Value × Millage Rate = Annual Property Tax
Example:
If your home’s taxable value is $125,000 and the millage rate is 40 mills (or $40 per $1,000), your annual property tax would be about $5,000.
Why Property Taxes Can Be Tricky for Buyers
When you buy a home, your property taxes might be very different from what the seller is paying. Here’s why:
- Reset on Sale: In Michigan, property taxes “uncap” when a home is sold. That means your taxable value resets to match the current market value.
- Different Millage Rates: Two homes in different school districts or townships may have very different tax bills, even if the homes are the same price.
- Special Assessments: Some neighborhoods charge extra for things like new sidewalks, sewer lines, or road improvements.
Why Property Taxes Matter When Buying a Home
Many buyers only focus on the price of the house and forget about the cost of owning it long-term. Property taxes are one of the biggest ongoing expenses, and they can make a big difference in your monthly budget.
For example:
- Two homes with the same purchase price could have very different property tax bills depending on where they’re located.
- A home in one city might cost you $300 a month in property taxes, while a similar home in another city could cost $450 or more.
This means you could afford the mortgage but struggle with the taxes if you don’t factor them in.
Why Property Taxes Change Over Time
Even after you move in, your property taxes won’t stay the same forever. They can rise (or sometimes fall) for a few reasons:
- Inflation Adjustments – Michigan caps yearly taxable value increases, but if inflation goes up, your taxes may rise too.
- Millage Renewals – Local governments often ask voters to renew or increase millages for schools, fire departments, or libraries. A “yes” vote means higher taxes.
- New Community Projects – If your city builds a new park, expands public safety services, or updates roads, taxes may go up to cover those costs.
- Changes in Your Home – Adding a new deck, finishing your basement, or building an addition can increase your taxable value.
That’s why it’s smart to check not just what the current owner pays in taxes, but also what you will likely pay after the sale, and how your bill could grow in the future.
Property Taxes in Livingston County: What to Expect
Livingston County is known for its mix of small towns, rural areas, and growing neighborhoods. Property taxes can vary a lot depending on where you buy:
- Townships vs. Cities: Homes in rural townships often have lower taxes than homes in cities, where services like public water, sewer, and city-maintained roads add costs.
- School Districts: Two homes on the same road may fall into different school districts, which can change the tax rate. Strong school systems often mean slightly higher taxes but also add to long-term property value.
- Proximity to Amenities: A home closer to shopping centers, highways, and schools may come with higher taxes than one farther out in the countryside.
Example: A home in a busy area with access to schools, city water, and road maintenance may have higher taxes than a similar home just a few miles away in a rural township with well water and gravel roads.
Knowing these differences can help you compare homes more accurately when house hunting.
What Property Taxes Mean for Your Mortgage
When you get a mortgage, your lender often includes property taxes in your monthly payment through something called an escrow account.
Here’s how it works:
- Your lender collects part of your yearly property taxes each month.
- That money goes into escrow.
- When taxes are due, the lender pays them for you.
This means your monthly payment will be higher than just the loan amount. Always check the estimated property taxes when figuring out if a home fits your budget.
Things to Ask Before You Buy
Before you close on a home, make sure to ask these questions:
- What is the current taxable value of the home?
- This helps you understand what the seller is currently paying.
- What will the new taxable value be after I buy it?
- In Michigan, when a home is sold, the taxable value “uncaps” and resets to match the market value. This often means your taxes will go up compared to what the seller was paying.
- What’s the millage rate in this area?
- Ask your REALTOR® or check the local government website. This rate affects how much you’ll pay.
- Does this home qualify for the Principal Residence Exemption (PRE)?
- If it will be your main home, this exemption can save you hundreds (sometimes thousands) of dollars each year.
- Are there any special assessments?
- Some neighborhoods have extra taxes to cover things like new sidewalks, sewers, or lighting.
Tips for Managing Property Taxes
Even though property taxes can’t be avoided, there are ways to plan for them:
- Include them in your monthly budget
Don’t just focus on the mortgage payment. Make sure you know the full monthly cost of owning the home, including property taxes, insurance, and utilities. - Use an escrow account
Most lenders will include property taxes in your monthly mortgage payment and keep the money in an escrow account. This makes it easier to save up for the yearly bill. - Check for tax exemptions
Beyond the PRE, some areas have exemptions for veterans, seniors, or people with disabilities. Always ask what you qualify for. - Keep an eye on your assessments
If you think your home is assessed too high, you can appeal it. Lowering your assessed value means lower taxes.
Tips for Lowering Your Property Taxes
The good news is that there are ways to make sure you’re not paying more than you should. Here are some smart steps buyers and homeowners can take:
- Apply for the Principal Residence Exemption (PRE):
This exemption (sometimes called the Homestead Exemption) lowers your taxes if the home is your primary residence. Always file this right after closing. - Double-Check Your Assessment:
Review your property record card at the local assessor’s office. Sometimes mistakes happen, like the home being listed with more square footage than it really has, or showing features (like a finished basement) you don’t actually have. - File an Appeal if Needed:
If you think your taxable value is too high, you can appeal it. Most Michigan towns have a Board of Review that meets in March where you can bring evidence — like recent comparable sales — to argue your case. - Keep Improvements in Mind:
Adding big upgrades like a garage, deck, or pool will likely raise your property taxes. Plan your renovations with this in mind.
Example: What This Looks Like in Real Life
Imagine you’re buying a home for $250,000 in Southeast Michigan.
- Current owner’s taxable value: $120,000
- Millage rate: 40 mills
- Current taxes: $4,800 per year ($400/month)
When you buy, the taxable value “uncaps” and resets closer to $250,000.
- Your new taxable value: $250,000
- Millage rate: 40 mills
- New taxes: $10,000 per year ($833/month)
That’s more than double what the seller was paying! This is why asking questions before closing is so important.
Key Takeaways for Michigan Homebuyers
- Property taxes vary from place to place — even in the same county.
- Taxes are based on taxable value and millage rates.
- When you buy a home, taxes “uncap” and may rise compared to what the seller paid.
- Taxes can change over time due to inflation, millage votes, and home improvements.
- Buyers should check projected taxes, not just the seller’s current bill.
- Don’t forget to file for your PRE to save money.
Final Thoughts
Property taxes may not be the most exciting part of buying a home, but they’re one of the most important. Understanding how they’re calculated, what exemptions are available, and how much you’ll actually pay can save you from financial stress later.
If you’re planning to buy a home in Michigan, work with a knowledgeable REALTOR® who can guide you through the numbers and help you compare homes not just by price, but by true monthly cost of ownership. That way, you’ll feel confident that your dream home fits your lifestyle and your budget.
