Owning a home in Michigan can be an expensive endeavor. In addition to mortgage payments, homeowners in Michigan pay a significant amount in property taxes each year. Although the state's constitution provides for limits on yearly increases, Michigan has some of the highest property taxes in the country.

Michigan is mid-line when it comes to its tax burden. According to Tax Foundation's most recent data, the state ranked 25 with an average tax burden rate of 9.4%, with the average individual income tax rate of 4.25%. 

Average Property Taxes

Michigan's average property tax rate is 1.71%, which ranks it as the ninth-most expensive state in the country, as of 2018. State law prevents the annual taxable value of property from increasing by more than the inflation rate or by more than 5%, whichever is lower. This safeguard means that the assessed value of a home may be greater than its taxable value. If a homeowner adds improvements or renovations that increase the value of a home, then these limits on the taxable value of the property do not apply.

Michigan has two counties where the average effective property rate exceeds 2.0%: Ingham and Wayne. Wayne County, which is home to Detroit, has the highest average effective property tax rate at 2.69%. However, with a median home value of only $86,000, Wayne's median annual property tax payment of $2,314 ranks behind seven other counties: Washtenaw at $3,905, Oakland at $3,314, Ingham at $2,710, Livingston at $2,636, Macomb at $2,527, Kalamazoo at $2,503 and Clinton at $2,457.

Michigan has two counties where the average effective property tax rate is less than 1.0%: Benzle and Leelanau have average effective rates of 0.94% and 0.91% respectively. 

Calculating Property Taxes

The state of Michigan determines property taxes by calculating the assessed value of a home. A local tax assessor determines the price at which a home would sell in the market, and the assessed value is 50% of this market price. For a new home purchase, taxable value always equals assessed value. However, since the state's constitution has restrictions on property tax increases, the assessed value of a home may be higher than its taxable value.

Once the state determines the taxable value of a home, it applies a levy of 6 mills to this amount. A mill is equal to $1 for every $1,000 of taxable value. In addition to the state levy, local governments levy additional mills. The state multiplies taxable value by the combined state and local millage rate to determine the property taxes that are due.

For example, a home with a market value of $100,000 has an assessed value of $50,000 ($100,000 times 50%). If the local millage rate is 20, then the total millage rate used to calculate the property tax bill is 26, which represents the state rate of six plus the local rate of 20. Therefore, the total property taxes due equal $1,300, which represents 26 times 50.

Michigan also has a rule known as the Principal Residence Exemption. This rule exempts a homeowner from paying the first 18 mills in school taxes, provided that the home is a primary residence. Therefore, homeowners may pay different rates within the same local jurisdictions, depending on whether their homes are primary residences.

Comparing Neighboring States

Two of Michigan's neighbors have relatively high property taxes, while one has relatively low rates. Indiana, which borders Michigan to the south, has a relatively low effective property tax rate of 0.88%. Indiana's average annual property tax of $2,190 is less than the national average. On the other hand, Ohio, which also borders Michigan to the south, has property taxes that are higher than the national average, but lower than those in Michigan. Ohio has the 12th-highest property taxes in the nation, with an average effective property tax rate of 1.55%. Wisconsin, which shares a border with Michigan's Upper Peninsula, has some of the highest property taxes in the nation. The state ranks as the fifth highest in the country, with an average effective property tax rate of 1.95%.

The Bottom Line

With the ninth-highest property tax rate, Michigan is well above the national average at 1.71%. But  the Great Lake state is still fairly middle-of-the-line when it comes to the average tax burden in the country. How much you pay overall for property taxes will depend on the value of your property. This value is assessed with an appraisal. Some Michigan homeowners may be able to save some money by qualifying for an owner-occupied exemption.

Minnesota Property Tax Guide

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