March 2025 Housing Report -Michigan Property Taxes Overview

Michigan property taxes can change dramatically after a home sale. The post-pandemic market brought rising inflation and property values, triggering a key limit in Michigan’s tax law. In 2023, inflation hit 7.9%, and for the first time, the

full 5% cap on taxable value increases went into effect. Buyers need to understand how property taxes reset and what that means for future bills.

The Rules: Headlee Amendment & Proposal A

Michigan’s Headlee Amendment limits how much tax revenue local

governments can collect, forcing rate reductions when property values rise

faster than inflation. Proposal A, passed in 1994, caps annual taxable value

increases at the lesser of; inflation or 5%. While this cap generally protected

homeowners from sharp tax hikes, it has now come into play due to high

inflation. Inflation rates were 3.3% in 2022, 7.9% in 2023 (capped at 5%), 4.1%

in 2024, and 2.9% in 2025. These figures determine how much a property’s

taxable value can increase annually—unless it’s sold.

What Happens When a Property Sells

When a home sells, the capped value and taxable value are reset the following

January 1st. The new owner’s taxable value becomes equal to the SEV(State

Equalized Value)—half the home’s assessed market value. This often results in a

significantly higher tax bill than what the seller was paying. From there, future

increases are once again capped by inflation or 5%.

Taxable vs. Market Value: The Gap

From 2012 to 2025, Michigan property values increased by 196%. But

capped taxable values for homeowners who didn’t move rose only 37.9%.

This large gap explains why new buyers often pay much more in taxes than

their neighbors.

Don’t Focus on the Wrong Numbers

Buyers should not compare their expected taxes to those of the seller or

nearby homeowners. Instead, they should look at the current SEV and

determine whether it reflects about 50% of the home’s true market value. If the

SEV appears too high relative to the sale price, it may be worth discussing with

the local assessor.

Michigan’s tax system favors longterm owners by limiting annual increases. But after a sale, the system resets—and the new owner may face a sharp increase. Knowing how SEV and taxable value work is essential to making informed real estate decisions.

Click here to view the full 2025 March Housing Report