How Property Taxes are Calculated

To understand how taxes are calculated, a look back at Michigan's history is in order.

Taxable Value vs. Assessed Value

Until 1994, property in Michigan was assessed at half its market value for tax purposes. This is known as a property's assessed value (AV).

In 1994, Michigan voters passed Proposal A, which changed the State's constitution. Proposal A shifted some of the tax burden off of property and onto the sales tax, which rose from four (4) to six (6) cents on every dollar spent.

The result of this proposal was the development of a new way of calculating property taxes using what's known as a property's taxable value (TV). A property's taxable value is determined using one of the equations below (whichever one is less):

• (Last year's taxable value) - (losses) + (5%) + (additions);

      OR

• (Last year's taxable value) - (losses) + (the rate of inflation) + (additions).

Under Proposal A, the growth of a property's taxable value is limited - or "capped" - with annual increases of not more than the lesser of five percent (5%) or the Consumer Price Index (CPI), which is set by the Michigan State Tax Commission.

Because of how taxable value is calculated, it is - in many cases - less than a property's assessed value. However, when a piece of property is sold or a title is transferred, the property's taxable value becomes equal to the amount of its assessed value for the tax year following the year in which the sale or transfer took place. This is called "uncapping" a property's taxable value. After this has taken place, the lesser of five percent (5%) or the CPI applies to future increases in taxable value, until there is another sale or transfer of ownership of the property.

The taxable value for parcels in the city of Midland can be found on the parcel owner's annual tax bill or assessment change notice. This information can also be found on the City Assessor's Office Online Property Information web page.

Property Assessment

Even though taxes are based on taxable value, the assessed value is still calculated each year so that property values can be uniformly assessed at 50 percent of market value, as required by the Michigan Constitution.

The City of Midland Assessor's Office annually assesses each property within the city using mass appraisal techniques. This involves studies and analysis of the local real estate market.

The City Assessor also considers new construction, improvements to property (such as installing fencing or new pavement), and demolition of structures when calculating additions and/or losses to property values.

What's a Mill?

The property tax rate in Michigan is referred to as a millage, and it's figured in mills. One mill is equal to 1/1,000 of a dollar. Or, more simply, for every $1,000 in taxable value, a property owner will pay $1 in property tax.

Click here to view millage rates for the current year.

Figuring Your Taxes

Property owners can calculate their tax bill by multiplying their taxable value by the millage rate.

FOR EXAMPLE, if the City's millage rate is 10 mills, property taxes on a home with a taxable value of $50,000 would be $500. The mathematical equation below illustrates how this is figured:

Administration Fee:  In addition to levying property taxes, the City of Midland levies a one percent (1%) administration fee based upon the amount of property tax paid. This helps cover the City's costs to determine and defend annual assessments.

To figure the amount due in administration fees on a home with a taxable value of $50,000, see the following example:

Total Taxes Due:  In the example above, the administration fee of $5 added to $500 in property tax would equal a total of $505 owed.

Collecting and Dispersing Taxes

To find out how property taxes are collected and dispersed, click on the link at left.