With the recent news that Detroit homeowners were overtaxed at least $600 million between 2010 and 2017, and that restitution for those losses is unlikely, homeowners are probably going to take a close look at their property tax assessments this year.
But how do you know if the assessment is accurate? And how do you contest one that seems too high?
Whether you’re a legacy property owner who wants to keep an eye on upcoming taxes or a potential homebuyer trying to budget for the future, this guide can help demystify property taxes, just in time for the arrival of your annual notice of assessment.
“THIS IS NOT A BILL”
Homeowners get their “Notice of Assessment” in the mail at the beginning of the year. On the upper right will be a big note: “THIS IS NOT A BILL.” (Here’s an example of what it will look like.)
But don’t be fooled—the values on this document are key to how your bill gets calculated, so in many ways it’s actually more important than the actual bills you’ll receive later.
Unless you’re an accountant or lawyer, the legal terms in the notice are not at all obvious. Here’s a definition of what each means.
ASSESSED VALUE: Determined by a property’s market value. This should be half the amount you could sell your house for (the “True Cash Value”). The assessed value x 2 = market value. State law requires that assessments not exceed 50 percent of a property’s market value. This number will go up and down each year and is based on sales studies, not your individual house sale.
TAXABLE VALUE: The first year you own a house, this number should match the assessed value. This value is “capped” and cannot fluctuate each year beyond the rate of inflation (“Consumer Price Index”) or 5 percent, whichever is lower.
STATE EQUALIZED VALUE “SEV”: This is the assessed value that has been adjusted following county and state equalization. It’s usually the same as the assessed value.
What’s a millage rate?
Simply stated, 1 mill equals $1 for every $1,000 of taxable value. Millage rates are levied by the state, county, and local municipalities, and cities are heavily reliant on property taxes to function. Millage rates vary across cities, and can even vary within the same municipality if there are multiple school districts.
The tax bill
The total annual property tax bill for the year is your Taxable Value divided by $1,000, multiplied by the local millage rate. Here’s the equation:
In July, you’ll receive your summer tax bill, which is the higher of the two bills. You can pay in one payment due August 31 or in two installments in August and December. You’ll receive your winter tax bill in December, and it’s due by January of the next year. If you have a mortgage, all of these bills are generally included in your monthly mortgage payments.
Things to check for
When you get your notice, you should look for a few things.
If you live in a house you own, your Principal Residence Exemption should show 100 percent (if you’re in a duplex it will be 50 percent). This exempts you from paying the tax levied by a local school district for operating purposes, up to 18 mills.
If this is the first year you’ve owned the house (there was a transfer of property last year), the assessed value and taxable value will match. And while the value is based on sales studies, not on your individual sale, it should be around half or lower than the price you bought it for. If it’s significantly more, this might be a sign you’ve been overassessed.
If you’ve owned the house for more than a year, you want to make sure that your taxable value is only increasing by the rate of inflation, which is dictated by the state. The 2020 inflation rate multiplier is 1.019 (or an increase of 1.9 percent). It if has increased more than that 1.9 percent, it could be because your property tax uncapped due to new construction. If there wasn’t an “uncapping event,” then you may have been overassessed.
Appealing your bill
This process can seem overwhelming, but it is your right, and could potentially save you thousands over the years. The first step in the appeals process is to go to the board of review—in Detroit this begins with the Assessors Review in February.
Homeowners bring information regarding why they are requesting a change in assessment—this information may include photographs, estimates of repairs, sales studies, comparisons, and any other pieces of evidence you think is relevant.
Most appeals dealing with overassessment are looking at property comparisons in the same neighborhood. You can do this yourself by looking up recent sales on sites like Trulia (make sure they are actual sales not asking prices), but an official report from an independent appraiser would hold more weight.
Photos and information explaining the specific property (like structural defects, fire damage, etc.) can also be helpful. Also, if the market price (“True Cash Value”) is much higher than the price you paid, this information may also be relevant.
As long as you start the process, you have the option to appeal again. And this can buy you time when preparing next time, or to engage an independent appraiser and/or lawyer. If you appeal the local Board of Review decision, you will have to pay filing fees to head to the Michigan Tax Tribunal. Though fees range in cost, if the value in contention is $100,000 or less, it’s $250.
Dates to know
The cities of Hamtramck and Highland Park could not say for sure when assessments would be mailed, though they estimated notices would be sent in early February. Detroit has said that notices should be out the last week of January.
Other important dates:
- Detroit Assessor’s Review - Feb 1 through 15 (in person or via letter). If appealing, go to the March Board of Review.
- Hamtramck Board of Appeals - March 9 and Thursday 12 (make an appointment)
- Highland Park Board of Review - March 9, 11, 12 (walk-in or make an appointment)
Other ways to change your bill, and how to deal with Delinquent Property Taxes
If you cannot pay your taxes due to financial hardship, you may be able to reduce or eliminate your current year’s property taxes with the Homeowner’s Property Tax Assistance Program (HPTAP). HPTAP, also know as Property Tax Exemption (PTE), provides an opportunity for homeowners to be exempt from their current year property taxes based on household income or circumstances.
If you are behind on your property taxes, there are several payment plans and other options that may help you to avoid foreclosure. United Community Housing Coalition offers one-on-one assistance for property tax help and foreclosure prevention.
Who can help?
- Detroit Justice Center is helping Detroit residents who wish to appeal—contact their Community Legal Workers at 833-200-0093 or firstname.lastname@example.org
- United Community Housing Coalition offers one-on-one assistance, and can help you navigate delinquent taxes and PTE. Visit their website uchcdetroit.org or call their Tax Hotline at 313-405-7726.
Reach out to your assessor
In Detroit, the City Assessor’s number is (313) 224-3035 and you can find FAQs and more information here.
In Highland Park you can call the Treasurer’s office at 313-252-0050 ext. 229.
In Hamtramck call city hall at 313-800-5233 and then follow the prompts to connect with the Assessor’s office.
Alissa Shelton is the executive director of Brick + Beam Detroit, which is also offering free information workshops throughout January and February on tax assessments in partnership with local community organizations.
She has appealed her property tax assessments twice, once for over-assessment and once for illegal uncapping, and both times her assessment was lowered. She’s also a licensed builder founder of the Hamtramck community space Bank Suey.