In 1994, Michigan voters passed “Proposal A”, which dramatically changed, and complicated, property taxes in the State of Michigan.  Property taxes now had a “cap” on increases each year, which is limited to the lower of the rate of inflation, or 5%, whichever is lower, until the property is sold.  Typically, inflation is around 1-3%, meaning your property taxes will not increase very much in Michigan, but will likely increase some every year.  When a property is sold, the new owner will often see a large jump in their property taxes, when compared to the prior property owner, due to a process known as “uncapping”.  This leads to two important things that must be addressed when a property is purchased in Michigan:

  1. Should the property be uncapped?  Many transfers of property, such as a sales to an immediate family member, or a transfer between related entities, does not “uncap”.  It is important that the assessors office be made aware of any of these eligible exceptions to the uncapping process.
  2. The lower the value is in the year after a sale, the lower the starting number for this inflation cap.  If taxes are appealed or reduced soon after a sale, this can have a dramatic effect on the taxes a property owner pays.  See the graph for an example of how this can work.  

Both of these items mean it is important to speak with a property tax professional to ensure your taxes are assessed fairly.  Contact Coucke Law today to ensure your taxes are being assessed fairly.  Click on the Link Below for an example of Proposal A and the Inflation Cap in action.

Proposal A Example

Proposal A: The Importance of Appealing Your Taxes Early

In 1994, Michigan voters passed “Proposal A”, which dramatically changed, and complicated, property taxes in the State of Michigan.  Property taxes now had a “cap” on increases each year, which is limited to the lower of the rate of inflation, or 5%, whichever is lower, until the property is sold.  Typically, inflation is around 1-3%, meaning your property taxes will not increase very much in Michigan, but will likely increase some every year.  When a property is sold, the new owner will often see a large jump in their property taxes, when compared to the prior property owner, due to a process known as “uncapping”.  This leads to two important things that must be addressed when a property is purchased in Michigan:

  1. Should the property be uncapped?  Many transfers of property, such as a sales to an immediate family member, or a transfer between related entities, does not “uncap”.  It is important that the assessors office be made aware of any of these eligible exceptions to the uncapping process.
  2. The lower the value is in the year after a sale, the lower the starting number for this inflation cap.  If taxes are appealed or reduced soon after a sale, this can have a dramatic effect on the taxes a property owner pays.  See the graph for an example of how this can work.  

Both of these items mean it is important to speak with a property tax professional to ensure your taxes are assessed fairly.  Contact Coucke Law today to ensure your taxes are being assessed fairly.  Click on the Link Below for an example of Proposal A and the Inflation Cap in action.

Proposal A Example