Tax and Assessing Frequently Asked Questions
Tax and Assessing Frequently Asked Questions When will my property be evaluated?
The taxable status of real and personal property for a tax year shall be determined as of each December 31 of the immediately preceding year, which is considered tax day. An assessing officer is not restricted to any particular period in the preparation of the assessment roll but may survey, examine, or review properties at any time prior to or after the tax day.
How is my assessed value determined?
Land values are determined based on sales of vacant land. The building size and features are measured and cost out using the State Assessors Manual which contains average construction costs for the State of Michigan. The resulting cost is then adjusted by a county multiplier which will adjust the State costs to Allegan County costs. This resulting value is further adjusted by an ECF (economic condition factor), which will adjust the value to the City of Allegan's market. This final building cost is added to the land value for a true cash (or market) value. 50% of true cash value is the assessed value.
Why do assessed values change from year to year?
When market value changes, naturally so does assessed value. For instance, if you were to increase the total market value of a parcel of property by building a garage, the assessed value would increase proportionately. Similarly, should a property value be decreased because of a fire or other catastrophe, the assessed value would decrease to show the downward effect of the damage on the market value of the property. The economy of the entire community affects assessed value. For example, over the years more property owners have rehabilitated or invested in new construction in and around the City of Allegan; and all property values within the City have increased. This can easily be seen by looking at the asking prices of properties that are currently for sale on the open market and by finding out what properties have actually sold for within the City of Allegan. The Assessor has not created this value, he simply has the legal responsibility to discover it as it exists and appraise property accordingly. People make value by their transactions in the market place.
What is the difference between assessed value and taxable value?
The State of Michigan requires that properties be assessed at 50% of the true cash (or market) value of the property. Taxable value is determined by taking the prior year taxable value minus any losses (such as fire and demolition), multiplying by the current year CPI, plus any additions (such as new construction). Since the passage of Proposal A in 1994, property taxes are calculated on taxable value. Prior to Proposal A, property taxes were calculated on assessed value. CPI is defined as Consumer Price Index.
If I repair my home will my assessment go up?
Most homes are assumed to be maintained and normal repairs usually will not increase the assessment. If you are fixing up a home that has not been maintained or needs many repairs, you may want to file a "Request for Non consideration of the True Cash Value of Normal Repair, Replacement and Maintenance Expenditures" form. Form number 865, formerly L-4293. You can stop by the Assessor's office at city hall and pick one up or call the Assessor's office at (269) 686-1109 and we will send one to you, or you can click here to download it. Normal repairs and maintenance such as siding, windows, porches, roof, heating systems, painting and interior remodeling will not be added to your assessed value until you sell the property to someone else. Expenses which are part of a structural addition do no qualify.
What is a Property Transfer Affidavit?
P.A. 415 defines transfers and requires that whenever a property transfers ownership, a Property Transfer Affidavit must be filed by the new owner with the assessing officer (even if you are not recording a deed) within 45 days of the transfer. Click here to download the PTA. This affidavit must disclose the following:
- The parties to the transfer
- The date of the transfer
- The actual consideration for the transfer, and The property identification number or legal description.
- The property transfer affidavit must be filed within 45 days of transfer.
- If a property transfer affidavit is not filed timely, a penalty of $5/day (maximum $200) applies.
What is "uncap"?
Under Proposal A, a property is "uncapped" in the year following a transfer of ownership. This means that the taxable value for the year following a transfer will be the same as the assessed value for that year. This can result in a large increase in taxes for a new property owner in the first year of ownership. After that first year, the taxable value is again subject to the inflationary increase.
How can I appeal my assessed value?
At the end of February every property owner will be mailed an assessment change notice stating the new assessed/taxable values and other information important to the property. if you disagree with any of the information on the notice, you can call the Assessor's office and schedule an appointment to meet with the Board of Review during the listed appeal dates. The dates and times of the meetings are printed on the Assessment Change Notice. Once the Board of Review has adjourned, the assessments are set until the following year. If you are not satisfied with their decision; you may appeal to the Michigan Tax Tribunal. Click here for the instructions on this procedure and click here for the petition.
What is a Principle Residence Exemption?
The Principle Residence Exemption was formerly called the Homestead Exemption. The State of Michigan changed the name to alleviate confusion with the Homestead Exemption Claim filed on your individual tax return each income tax year. The PRE exempts you from paying up to 18 mills of school operating tax, on your principle residence you own and occupy. You must file for this exemption by completing a PRE Affidavit, available at City Hall or you can click here to download it.
What is the deadline for filing a Principle Residence Exemption affidavit?
The filing deadline is May 1 of each year.
I moved to a different home before the May 1 filing deadline. May I claim my new home?
Yes. If you buy a new home and move into it before the May 1 filing deadline, you may claim an exemption on the new home. New residences may be claimed by filing a Principle Residence Exemption affidavit.
Can I, as closing agent, be held liable to a buyer or seller if the buyer is not granted a homestead exemption because I did not provide either an update or an affidavit form, or I did not submit their form on time?
Closing agents are required to provide either an affidavit or update form at closing. However, PA 415 of 1994 does not provide a legal course of action against the closing agent, by the buyer or seller, if the agent fails to provide a Principle Residence Exemption affidavit or fails to file the form with the local tax collecting unit.
RESCINDING AN EXEMPTION:
When I claim an exemption on my new residence, what happens to the exemption on the residence I sold? The exemption on your old home remains in effect until December 31 of the year your home is sold. If you move to your new residence before your first home is sold, the exemption expires on December 31 of the year you move out. You must rescind the homestead exemption within 90 days of the date you no longer own or occupy the property as your principal residence. You may rescind your exemption on the REQUEST TO RESCIND/WITHDRAW PRINCIPLE RESIDENT EXEMPTION form. click here to download it. I am moving into a new home and converting my current home to a rental property in November. Do I have to rescind the exemption on my current home? Yes, within 90 days of moving. The exemption will remain in place until December 31 of the year the use is changed from your principal residence to a rental property. What happens when a lender has foreclosed on a mortgage and the home is now vacant? The lender must rescind the homestead exemption using the REQUEST TO RESCIND/WITHDRAW PRINCIPLE RESIDENT EXEMPTION form. click here to download it.
RESIDENCY: What determines principal residence?
The test the Michigan Department of Treasury uses to determine principal residence includes such things as where you are registered to vote, the address on your driver's license, where your children attend school, and the address from which you file your income tax returns.
I own two homes in Michigan. For which home do I claim the exemption?
Claim the exemption for the home you occupy as your principal residence.
I have a home in Michigan and in another state. May I claim an exemption on my Michigan home?
You must be a Michigan resident to claim this exemption. You may claim your Michigan home only if you own it and occupy it as your principal residence. You may not have more than one principal residence.
OWNERSHIP: May renters file for this exemption?
No. You must own your principal residence to claim an exemption for it. My children own my home, but I hold a life estate. May I claim the exemption? Yes. Complete the affidavit using your name, address, social security number, and signature. Your children should not sign the affidavit. I am leasing my home with an option to buy. May I claim my home? No. Leasing with an option to buy is considered a rental arrangement, so the home is ineligible. When you exercise the option to buy, you may claim an exemption.
QUALIFIED HOMESTEAD PROPERTY: I live in a nursing home but still maintain a home. May I claim an exemption on the home I own?
Yes, unless the home is rented to another person. I own the lot adjoining and contiguous to my home, and it has a different property identification number than the parcel on which my homestead is located. May I also claim an exemption on this property? You may claim an exemption on this property as long as the property claimed is adjoining or contiguous to your home. A road does not break contiguity. File an affidavit for each parcel.
MULTI-PURPOSE PROPERTY: I live in part of my home and operate a business in another part. May I claim an exemption?
Yes, but only on the portion of the property that is your home. You may claim the partial exemption even if the property is classified as commercial.
I rent a room in my home to a boarder. May I still claim an exemption?
Yes. If more than 50 percent of your home is used as your principal residence, you may claim an exemption for your entire home. If you use 50 percent or less of your home as a principal residence, a percentage of your home that you occupy will be used.
I own a duplex. I live in one unit. My father lives in the other unit but does not pay rent. May I claim an exemption on both units?
You may claim an exemption only on the unit you occupy as your principal residence even if there is an adjoining entrance between the units.