ASSESSMENTS & TAXES
What gives the City of St. Johns the authority to assess my property for taxation purposes?
Public Act 206 of 1893 (link provided takes you to State of Michigan Web Site) as amended, also known as the General Property Tax Act. The City Assessor is statutorily required to determine the assessable and taxable value of all real and tangible personal property within the City as of December 31st, which is deemed "Tax Day".
What types of property is assessed?
All property may be divided into two major categories: Real property and personal property.
Real property is generally defined as land and all things attached to the land. Interest, benefits, and rights inherent in the ownership of physical real estate.
Personal property which consists of movable items not permanently affixed to, or part of, the real estate. This includes furniture and fixtures, machinery and equipment belonging to a business; certain public utilities; structures on leased land and other similar properties.
What is "assessed value"?
Assessed value is 50% of estimated fair market value which is determined by the City Assessor. Assessed values change with the market year to year. The assessor does not create value, but simply has the legal responsibility to determine it and value the property accordingly.
What is "SEV"?
SEV is State Equalized Value and a result of the county equalized value reviewed by the State Tax Commission. The State Tax Commission has the authority to add or subtract a blanket factor to all properties in a class if the county's submitted values do not equal 50% of market value.
What is Proposal A?
In 1994 Proposal A brought significant changes to the State's property tax system. However, Proposal A did not change standard assessment practices; all real and personal property must still be assessed at 50% of its true cash value. Proposal A created a different value (taxable value) for property taxes to be calculated on. Taxes are based on taxable value not state equalized value (SEV). Proposal A also requires homeowners to file a Principal Residence Exemption Affidavit and Property Transfer Affidavit.
What is "taxable value"?
Taxable value was created by the passage of Proposal A in 1994. Property taxes are based on taxable value, not the SEV. Taxable value = Lesser of assessed value or capped value.
What is "capped value"?
Capped value is the lesser of +5% or the Consumer Price Index (CPI) applied to prior year's taxable value. The formula to compute is: (Prior year's taxable value - losses) x (5% or CPI, whichever is lowest) + additions = capped value. The process continues until there is a change in ownership (transfer) which would cause an "uncapping".
What is "uncapping"?
When ownership is transferred on a property, the valuation is "uncapped". The SEV is the new starting point for a buyer and the capping process starts all over again on the property until another transfer of ownership occurs. Beginning December 31, 2013 (PA 497 of 2012), the transfer of residential real property (homestead or non-homestead) is exempt from uncapping if the transferee is related to the transferor by blood or affinity to the first degree and the use of the property does not change following the transfer of ownership. A change in use would be from principal residence to rental, which would not be exempt from uncapping due to a transfer. Affinity to the first degree includes the following relationships: spouse, father or mother, father or mother of spouse, son or daughter, including adopted children and son or daughter of spouse.
Why were my taxes going up when my property values are going down?
When our State Legislature passed Proposal A in 1994, the Legislature did not anticipate the current economy and declining property values. Until 2007, Proposal A worked as designed, limiting the increase in taxes to the rate of inflation. There had been a steady increase in the real estate market, which typically was more substantial than the rate of inflation, thus “capping” tax increases to the rate of inflation.
Higher property taxes, with declining property values was a difficult concept to grasp. Neither local assessors, treasurers nor Boards of Review can change the law. Any changes to Proposal A Legislation to address a declining real estate market in relation to property taxes, would involve a constitutional amendment and a vote of the people. Property values seemed to have bottomed out in 2012 and started to recover in 2013.
Why are my taxes different from my neighbors when our houses are the same?
If you purchased your house in a different year than your neighbor, your taxable value would have been uncapped to the same as the SEV. Although you think your home is same as your neighbors; there are many interior and exterior attributes that affect a property's value such as lot size differences, year built, condition, finished basements, decks, etc.
Why do websites like "Zillow" say my house is worth a lot less than what the City has it valued at?
Zillow and other websites that estimate the value of your property use all the area recorded deeds and consider them sales. These so-called sales include: Sheriff's Deeds showing the sales price as the amount owed on the mortgage, distressed sales like foreclosures, and family sales. These websites also don't differentiate between: new houses and old houses, one story ranches and two story farm houses, city property and country property, etc. The City's Sales Studies do not include distressed sales (as per State Law) and compare similar age/style homes in comparable neighborhoods to determine the value of your home.
What if I disagree with the value placed on my property?
Review your property records to make sure the information is correct. Click here for instructions on how to review your property records online. Talk to the Assessor before attending the March Board of Review meeting. Take time to educate yourself and possibly correct the problem without an appointment with the Board of Review.
How do I get an appointment with the March Board of Review?
Change of Assessment Notices are mailed to property owners in late February. There are instructions at the bottom of the form as to when you can call to schedule an appointment. The March meeting is the only time property owners are allowed to protest value. Click here for a March Board of Review Petition form.
I have an appointment with the Board of Review, what do I do to prepare?
Be prepared to present testimony to the Board of Review supporting your claim that your property is assessed over 50% of market value. Showing a comparison between similar arms-length sales and your property would be most helpful in your appeal. A recent property appraisal by a state licensed appraiser is acceptable as long as the appraiser did not use distressed sales. Foreclosures and short sales are not "arms-length" sales and are not included in the sales study as they are distressed sales and do not reflect true market value.
What if I will be out of town during the March Board of Review?
You may submit a letter of appeal. The letter must be received before the close of the Board of Review. Include in your letter the parcel number, property address and the reasons for appeal along with any supporting documentation. You will be notified by mail of the Board's decision. You may also send someone to represent you at the Board. This representative must have a letter of authorization from you designating them as your representative.
Who makes up the Board of Review?
The Board consists of three City residents appointed by the City Commission. Board of Review members are familiar with the real estate market; usually realtors, insurance agents, and mortgage bankers.
How often does the Board of Review Meet?
The Board meets three times a year. The March meeting is solely for valuation disputes, poverty exemptions and classification appeals. The July and December Boards of Review are for Principal Residence Exemption (PRE) corrections, clerical errors and mutual mistakes of fact as well as poverty appeals not heard in March.
What if I don't agree with the Board of Review's decision?
You have the right to appeal with the Michigan Tax Tribunal. Your appeal must be filed with the Tribunal before July 31st of the current year.
How much will my taxes go up if I build a garage?
You can estimate the increase in taxes for the new garage by taking 50% of the market value of the new garage divided by 1,000 (as millage is based on $1 per 1,000 of taxable value) multiplied by the millage rate. If the new garage is valued at $20,000 x 50% = $10,000/1000 x millage rate = additional taxes for new garage. Click here for current millage rates.
What if I build the garage myself to save money?
Assessments are based on fair market value and the value the improvement(s) add to the property. It doesn't matter if you do the work yourself, hire a contractor, buy materials on sale or pay full price.
Will my assessment go up if I repair my property?
Normal repairs and maintenance will not increase an assessment. Examples include: siding, windows, roofing, painting, heating systems and interior remodeling. Renovations which add to the structure do not qualify as normal repairs such as converting an attached garage to living space.
PRINCIPAL RESIDENCE EXEMPTIONS
What is a "Principal Residence Exemption"?
A Principal Residence Exemption (PRE) exempts you from a portion of your local school operating taxes (18 mills) if you own and occupy your principal residence. You may only have one principal residence. The State cross-references a database to determine eligibility and checks drivers licenses, voter registration, income tax filing addresses, etc. There are two filing deadlines as of 2012; June 1st and November 1st. You must be living in the home as your principal residence and file the paperwork by said deadlines to qualify for same year exemption. Click here for Principal Residence Exemption Affidavit form (link takes you to State of Michigan Website).
I am buying a house on a land contract; can I claim a Principal Residence Exemption?
In order to qualify, the land contract has to be recorded and Principal Residence Exemption Affidavit filed by June 1st or November 1st.
I sold my house and purchased another house, what forms do I need to file?
You need to file a Request to Rescind Principal Residence Exemption form on the house you sold within 90 days of closing. You also need to file a Principal Residence Exemption Affidavit on the one you purchased if it is to be your Principal Residence. Click here for Request to Rescind Principal Residence Exemption form (link takes you to State of Michigan Website).
What if I convert my Principal Residence to a rental and buy another home to use as my Principal Residence?
You need to file a Request to Rescind Principal Residence Exemption form on the house you converted to a rental within 90 days of closing. You also need to file a Principal Residence Exemption Affidavit on the one you purchased if it is to be your Principal Residence.
What if I live in a house as my Principal Residence that has an apartment that I rent out?
If over 51% of the structure is used as your principal residence, you qualify for a 100% Principal Residence Exemption.
If you live in 50% or less, you need to claim that percentage. For example, if you live in 30% as your principal residence and rent out the other 70%; you would claim the 30% PRE and pay the homestead tax rate on the 30%. You would pay the non-homestead rate on the 70% you rent out.
How does a home office affect my Principal Residence Exemption?
If you have a home occupation or claim a home office on your income tax, the percentage claimed for business purposes would be taxed at the non-homestead rate. For example, if you claim 20% of your Principal Residence for business purposes on your federal income tax return you would claim an 80% Principal Residence Exemption. You would pay the homestead tax rate on the 80% and pay the non-homestead rate on the 20% you claimed for business purposes.
What if I own an adjoining lot to my principal residence that has a separate parcel number?
You can claim a Principal Residence Exemption on the adjoining property.
I purchased another home but haven't been able to sell my previous home. Is there anything I can do about the taxes on my previous home?
There is a three (3) year Conditional Rescission of a Principal Residence Exemption that allows an owner to receive a Principal Residence Exemption on their current property and the previously exempted property simultaneously if certain criteria are met. An owner may receive the Principal Residence Exemption on the previous principal residence for up to three (3) years if the property is not occupied, is for sale, not rented/leased, and not used for business or commercial purposes. Both homes must be in Michigan to qualify. Click here for the Conditional Rescission of a Principal Residence Exemption form (link takes you to State of Michigan Website). Click here for Conditional Rescission FAQ's (link takes you to State of Michigan Website).
I am on active duty in the military and rented my principal residence while I am away serving my country. Can I keep my Principal Residence Exemption?
A Conditional Rescission of an Active Duty Military Principal Residence Exemption enables a person with an established Principal Residence Exemption to retain the exemption while on active duty in the U.S. Armed Forces if the principal residence is rented or leased out. Click here for the Conditional Rescission of an Active Duty Military Principal Residence Exemption (link takes you to State of Michigan Website).
PROPERTY TRANSFER AFFIDAVITS AND REAL PROPERTY STATEMENTS
What is a Property Transfer Affidavit?
This form reports sales information and must be filed whenever a property changes ownership as transfers of ownership affects the taxable value of a property. Filing is mandatory and failure to file can result in penalties of $5 per day up to a maximum of $200. Click here for Property Transfer Affidavit form (link takes you to State of Michigan Website).
What is a Real Property Statement?
The Michigan Supreme Court has ordered that information about the financing of property sales be gathered. The purpose is to determine whether favorable financing provided by the seller may have caused the sales price to increase. If so, the increase would be deducted from the sales price in order to be considered for assessment sale study purposes. Any personal property (lawnmowers, appliances, furniture, etc.) included in the sale needs to be listed and likewise would be deducted from the sales price. Filing is mandatory; failure to file is punishable by fine and/or imprisonment. Click here for the Real Property Statement form (link takes you to State of Michigan Website).
What if I want to sell part of my property to a neighbor such as the rear 10 feet?
Any land divisions must be approved by the Assessor. A property owner may not make their property "non-conforming" in minimum lot size or building setbacks due to a land division or split. Draw up a sketch of what you are proposing to discuss with the Assessor and the Community Development Director. Click here for the Notice to Assessor of Transfer of the Right to Make a Division of Land form (link takes you to State of Michigan Website).
If you are considering a property split, splits are only done once a year as there are several taxing units that levy at different times of the year. December 31st is "tax day" and the status of your property on said date is reflected on the upcoming tax roll.