Legacy Law Blog

As a homeowner in Michigan, understanding your property taxes and knowing when to appeal them can be crucial for managing your finances effectively.

For many new homeowners, an unexpected large increase in their property taxes in the year after purchasing their Michigan home has the potential to make their new home unaffordable. There are options for homeowners who are hit with increased property taxes that they feel are incorrect.

If you believe your property is overvalued or if there are inaccuracies in your assessment, you have the right to appeal. An appeal is not a viable option for every homeowner because the property tax appeals process can be very expensive and time consuming. Given these challenges, it can be difficult for homeowners to know when the time is right to appeal their property taxes.

The following is a guide to help decide when and how to appeal residential property taxes in Michigan.

Understanding Property Tax Assessments

In Michigan, property taxes are calculated based on the taxable value of a property. The taxable value can increase by 5% annually or by the rate of inflation, whichever is less. For more information on the property tax assessment process for residential properties, see our earlier blog post.

When reviewing the property tax assessment, homeowners should pay careful attention to the assessor’s notes outlining the reason for the change to the property taxes for the year. Most assessments include a summary of the changes like the following:
This summary outlines the change in the assessed and taxable value from the prior year to the current year. Property owners should pay special attention to the assessor’s notes in #5 and #6. If the assessor notes that no property transfer took place in #5 and that the change reason is ‘Market Adjustment,’ it means that the city assessor applied the tax rate increase required by state law to the property. In other words, the property taxes increased by the minimum percentage required by state law. When property taxes increase for a property on this basis, the increase is generally not subject to appeal.

Property owners should pay special attention to this summary and understand the conclusions reached by the assessor that led to the increased property taxes before contacting legal counsel or filing an appeal.

When Should you Consider Appealing?                                      

You should consider appealing your property taxes if you believe the assessed value is incorrect or if there are significant discrepancies in your tax bill. Here are some scenarios where an appeal might be warranted:

1. Significant Discrepancy in Property Value

If the assessed value of your property is significantly higher than its true market value, an appeal may be a viable option to correct the assessed value. The assessed value for a property is based on sales of similar properties over the last one to two years which makes it vulnerable to rapid changes in the housing market or insufficient sales data in low population areas. For example, if your home was recently purchased for $175,000 but is assessed at $250,000, you should dispute the assessment.

Because historical data is used, there can be times when this data fails to track current market conditions, leading to inaccuracies. If this is the case, the single best evidence to present in appeal is a third-party appraisal. However, an appraisal can cost several thousand dollars.

Homeowners seeking to challenge the assessed value should carefully consider if their tax savings justify spending thousands of dollars on an appraisal and any legal expenses before filing an appeal.

2. Structural Changes or Renovations

If you've made significant improvements to your property that enhance its value, but the tax assessment does not reflect these changes, you should appeal. This ensures that your property's value is accurately represented.

3. Excessive Tax Increases

If your property taxes have increased unreasonably compared to previous years or compared to similar properties in your area, you may want to dispute the assessment. A sudden spike in taxes that doesn't align with local trends could indicate an error but be careful. The assessed value for a home is unique to the characteristics of the home. If there are few or no good comparable houses in the area, relying on the property tax status of your neighbors may lead to poor results on appeal.

How to Appeal Your Property Taxes

The appeal process in Michigan involves several steps:

1. Review Your Assessment Notice

Every February, you'll receive a notice of assessment from your local municipality. Review this notice carefully to ensure the assessed value is accurate.

2. Gather Evidence

To support your appeal, gather documents such as:

• Comparable Sales Data: Sales prices of similar homes in your area.
• Professional Appraisal: An appraisal done by a real estate professional.
• Records Showing Inaccuracies: Documents that highlight errors in the assessor's data, such as incorrect lot size.

3. File an Appeal with the Board of Review

Typically, the Board of Review in each municipality meets in March. You'll need to file a petition and possibly schedule an appointment to present your case. This step is necessary before appealing to the Michigan Tax Tribunal. Be sure to verify the deadline to appeal the property tax assessment by carefully reading the notice of assessment.

4. Appeal to the Michigan Tax Tribunal

If the Board of Review doesn't rule in your favor, you can appeal to the Michigan Tax Tribunal. Petitions for residential properties must be filed by July 31 of the tax year. The Tax Tribunal may not hear your appeal until the following year.

Tips for a Successful Appeal

• Be Prepared: Ensure you have strong evidence to support your claim.
• Focus on the Assessment: Avoid discussing tax rates or how tax money is used, as these are not within the board's authority.
• Seek Professional Help: If your case is complex, consider hiring a real estate attorney or appraiser to help you prepare and present your appeal.

Appealing your property taxes in Michigan can be a straightforward process if you understand the steps involved. Nobody likes to see their taxes increase every year, but this is virtually unavoidable. It is very important for property owners to understand their assessments and the reason for any tax increase before seeking legal counsel or filing an appeal.

By carefully reviewing your assessment notice, gathering the right evidence and following the appeal process, you can ensure that your property is accurately valued and that you're not overpaying on your taxes. Remember, even if you're appealing, you must still pay your taxes on time to avoid penalties.