Understanding Michigan Property Taxes & Tax Uncapping
One of the biggest surprises new homeowners face in Macomb and Oakland Counties is the Year 2 property tax jump. Whether you’re buying in Sterling Heights, Shelby Township, Clinton Township, Troy, Warren, or Rochester Hills, understanding how Michigan calculates property taxes—and how Proposal A impacts your payment—is essential to budgeting accurately before making an offer.
How Michigan Property Taxes Work: Proposal A
Passed in 1994, Michigan’s Proposal A limits how fast a home’s tax assessment can rise each year while you own it. However, when ownership transfers, that cap is removed—or "uncapped." To understand this, you need to know three key definitions:
- State Equalized Value (SEV): Roughly 50% of the property's true market value determined by your local assessor.
- Capped Value: The previous year's Taxable Value plus the rate of inflation (or 5%, whichever is less).
- Taxable Value (TV): The actual number used to calculate your annual tax bill. While you own the home, TV cannot exceed SEV.
⚠️ The Year 2 Tax Uncapping Trap
During Year 1 of homeownership, you pay property taxes based on the seller’s capped Taxable Value. On January 1st of Year 2, the tax cap "uncaps." The Taxable Value resets to match the current State Equalized Value (SEV), which often causes a significant tax increase.
Figure 1: How Proposal A tax uncapping impacts your Year 2 property tax bill in Michigan.
Real-World Math: $350,000 Home Purchase Example
| Timeline & Status | Taxable Value (TV) | Estimated Millage Rate | Approx. Annual Tax |
|---|---|---|---|
| Year 1 (Seller's Capped Rate) | $120,000 | 30 Mills | ~$3,600 / yr |
| Year 2 (Uncapped to SEV) | $175,000 (Resets to SEV) | 30 Mills | ~$5,250 / yr |
Key Michigan Property Tax Exemptions
1. Principal Residence Exemption (PRE) — Form 2368
If you own and occupy the property as your primary home, filing Form 2368 exempts you from paying up to 18 mills of local school operating taxes. This can save you thousands of dollars each year.
👉 Deadline: File on or before June 1st for the summer tax bill or November 1st for the winter tax bill with your local city or township assessor.
2. 100% Disabled Veteran Exemption — Form 5107 (MCL 211.7b)
Michigan provides a 100% property tax exemption for qualifying disabled veterans or their unremarried surviving spouses under State Law MCL 211.7b.
👉 Key Update: Once granted by your local municipality, recent state legislative updates streamline this exemption so qualifying veterans do not have to re-apply every single year unless requested or if residency changes.
Post-Closing Timeline & Assessment Appeal Deadlines
If you believe your new State Equalized Value (SEV) exceeds 50% of your property's true market value, you have the right to appeal. Follow this strict annual schedule:
| Timeframe | Action / Event | What You Need To Do |
|---|---|---|
| Closing - 45 Days | Property Transfer Affidavit (PTA) | File Form 2766 with your local assessor to avoid late filing fees. |
| Late February | Notice of Assessment Received | Review your new SEV and Taxable Value sent by the city/township. |
| March (Hard Deadline) | March Board of Review (BOR) | Required First Step: You must appeal directly to your local March BOR. |
| July 31st (Hard Deadline) | Michigan Tax Tribunal (MTT) | If dissatisfied with the March BOR outcome, file an appeal with the MTT by July 31st. |
Need Help Estimating Your Uncapped Taxes or Appealing Your SEV?
As a certified Pricing Strategy Advisor (PSA), I provide local homeowners and home buyers across Macomb and Oakland Counties with accurate pre-offer tax calculations and comprehensive Comparative Market Analyses (CMAs) to support March Board of Review appeals.
Ed Brittingham | Associate Broker, REMAX Eclipse
Designations: PSA, ABR, SRS
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