How Much Can Property Taxes Increase in Michigan?

Michigan voters passed Proposal A in 1994, creating a system similar to California's Proposition 13. It protects long-time homeowners from rapid tax increases but shifts the burden to new buyers through "uncapping" at sale.

Understanding how Proposal A works—and its exceptions—can save you thousands in property taxes.

The 5% or Inflation Cap: How It Works

For properties that don't change ownership, Michigan limits taxable value increases to the lesser of:

• 5% per year, or
• The inflation rate (Consumer Price Index)

Recent inflation rate multipliers:

This cap only applies to taxable value—the value used to calculate your taxes. The assessed value (State Equalized Value or SEV) can increase without limit.

The Uncapping Bomb: What Happens When You Buy

When property ownership transfers, the taxable value "uncaps" and resets to the State Equalized Value (SEV) the following year. This can mean massive tax increases.

This isn't an error—it's how Proposal A works. The new owner pays taxes on current market value while the previous owner enjoyed decades of capped increases.

What Triggers Uncapping (And What Doesn't)

Transfers that trigger uncapping:

• Sales (including land contracts)
• Adding or removing names from the deed
• Transfers to most trusts
• Transfers to LLCs or corporations
• Gifts (with exceptions)

Transfers that DON'T trigger uncapping:

• Spouse to spouse
• To a trust where you're the sole beneficiary
• Parent to child (if child doesn't own another home and uses it as primary residence)
• Through inheritance to specific family members
• Foreclosure or forfeiture

Understanding Michigan's Property Values

Michigan uses multiple values for property tax purposes:

• Assessed Value: Should equal 50% of true cash (market) value
• State Equalized Value (SEV): Assessed value after equalization
• Capped Value: Previous taxable value × inflation multiplier
• Taxable Value: Lesser of SEV or capped value

Only taxable value matters for your tax bill, but the gap between taxable value and SEV shows how much your taxes would jump if you sold.

Michigan's Principal Residence Exemption (PRE)

Michigan's most valuable exemption is the Principal Residence Exemption, which exempts your primary residence from the 18-mill school operating tax.

You must occupy the home as your primary residence to qualify. Rental properties and second homes don't receive this exemption.

Additional Michigan Property Tax Relief

Michigan offers several programs for property tax relief:

• Homestead Property Tax Credit: For households with income under $65,439 (2026)
• Disabled Veterans Exemption: Up to 100% exemption based on disability rating
• Poverty Exemption: Partial or full exemption for those below poverty guidelines
• Senior Citizen Property Tax Deferment: Defer taxes until sale or death

How Michigan Compares to Other States

Michigan's system closely mirrors California's Prop 13 but with a higher cap (5% vs 2%). Both create similar issues: longtime owners pay far less than new buyers for identical homes.

Appealing Your Michigan Property Assessment

Even with Proposal A protection, appealing an overassessment makes sense because:

• It reduces your taxable value if successful
• Lower assessments mean lower uncapping for future buyers
• You prevent compounding of overassessment errors

Michigan property owners must protest by:

• Board of Review: March (dates vary by township/city)
• Michigan Tax Tribunal: May 31 for residential properties
• July/December Boards: For clerical errors or poverty exemptions only

Check if your property is overassessed to determine if an appeal could lower your taxes.

Key Takeaways for Michigan Homeowners

• Annual cap: 5% or inflation (2.7% for 2026), whichever is less
• Uncapping at sale: Taxable value resets to SEV when ownership transfers
• PRE exemption: Saves ~$900 per $100,000 of taxable value
• Transfer carefully: Many common transfers trigger expensive uncapping
• Appeal deadlines: March for Board of Review, May 31 for Tax Tribunal
• Long-term protection: Great for staying put, expensive for moving

Michigan's Proposal A creates predictable tax increases for long-term owners but can shock new buyers with uncapping. Understanding these rules—and their exceptions—helps you plan property transfers and avoid costly mistakes.