It’s complicated, and since we’re talking this, I may have a question to ask that some good, Michigan lawyer may have the answer to.
Back in 1994 we added this wording to our state Constitution: “1. Limit annual assessment increase for each property parcel to 5% or inflation rate, whichever is less. When property is sold or transferred, adjust assessment to current value.”
So this means that the value upon which we are taxed is limited to the lesser of 5% or the rate of inflation, regardless of the increase in assessment. We still see the new assessment in every tax bill, but the tax base always complies with the limits. This means…
[li]No matter how the house increases in value, the taxes won’t necessarily force you out of your house if values run away.[/li][li]When you purchase a new home, it’s suddenly taxed at the assessed value. So your neighbors that have been there since 1994 are probably paying the decreased rate.[/li][li]If your property values go down (as they are here) your taxable value does not go down.[/li][/ul]
I think, though, that improvements are taxed at the current value. More than “safety,” I have to imagine this is the real reason we have to pull a permit for every bloody damned thing we do in my township. So say my value is 210, my assessment is 105, and my taxable value is 102. Now if I make an improvement such that my house is suddenly worth 220, my assessment jumps to 110, and I think the taxable value jumps to 107,000 (adding half the value of the improvement). It doesn’t reset the taxable value up to today’s value, but it factors in the improvements at today’s values.
Anyone know if this is true for Michigan? I’ll have a major bearing on the projects I choose to undertake in the future.