Under Michigan's Proposal A, when a residential property in Livingston County is sold and the deed is recorded, what happens to the property's taxable value for the following tax year?
Correct Answer
C) The taxable value uncaps and resets to the state equalized value (SEV), which equals 50% of the property's assessed market value
Under Michigan's Proposal A (MCL 211.27a), the annual increase in taxable value is capped at the lesser of 5% or the rate of inflation (CPI) while a property remains under the same ownership. However, upon a transfer of ownership — evidenced by the recording of a new deed — the taxable value 'uncaps' and resets to the state equalized value (SEV) for the following tax year. The SEV is defined as 50% of the property's true cash (market) value as assessed by the local assessor. This can cause a significant tax increase for buyers.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Fee simple absolute is the highest and most complete form of property ownership, giving the owner unrestricted rights to use, possess, enjoy, and dispose of the property. It is of unlimited duration and fully inheritable.
Community property is a system where property acquired during a marriage is owned equally by both spouses.
A freehold estate represents ownership of real property with an indefinite duration.
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