Think Before You Sell: You May Not Be Able to Afford It

Selling your home may or may not be the right thing for you to do right now, especially if you live in Michigan. If you bought your home after 1994 you have been living under a capped rate of taxable value. This means that from the time that you bought your home and an assessment was made your taxable value has been capped, which means that your taxable value has never went over the Consumer Price Index or 5%, whichever is less. This is providing that you didn't add or take away anything from the property. Now you have decided to sell your property and buy a new home elsewhere in the state. The person that buys your home is not going to realize the same taxable value as you did and nor will you. For example:

You purchased your home in 1994 for $50,000. Your assessed value was set at $24,500 and your taxable value was set at $24,500. Your taxable value is your base rate that is multiplied against your jurisdiction millage to provide you with your tax bill. Your increases are driven by the Consumer Price Index (CPI) which is a number that is provided, to assessors in October, by the state.

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Now you sell you home for $100,000. The new property owner will have an approximate tax base of $50,000, a difference of approximately $16,000. Now here's what that means in dollars and cents:

Jurisdiction Homestead Millage = 28.9854

Original Homeowner New Homeowner

28.9854/1,000 = 0.0289854 28.9854/1,000 = 0.0289854

$33,860 x 0.0289854 = $981.44 $50,000 x 0.0289854 = $1,449.27

Approximate Annual Tax Bill

As you can see the new homeowner is realizing a $467.83 increase over what the original homeowner would have paid on their taxes due to the uncapping of the taxable value.

Buying a new home should be a wonderful experience; however, if given the wrong information, it can soon turn into a nightmare. Be aware of what your tax liabilities are and what they will be once you buy a new home, avoiding any “drop to your knees” tax bills in your future.