Guides / Taxes after you buy
Short answer
In Michigan, a home’s taxable value is capped while one owner holds it, rising each year by inflation or 5 percent, whichever is less. When the home sells, the cap comes off and taxable value resets to the state equalized value, half of market value, the next year. That is why the seller’s tax bill is often lower than yours will be.
How the cap works
Since Proposal A in 1994, Michigan homes have two values. The state equalized value (SEV) is half of the home’s market value. The taxable value is what your bill is based on, and it can only rise each year by the inflation rate or 5 percent, whichever is less, until it reaches the SEV.
For 2026 the State Tax Commission set that inflation rate at 2.7 percent (a multiplier of 1.027). When prices rise faster than that for years, a long-time owner’s taxable value ends up well below the SEV.
What happens when you buy
A transfer of ownership uncaps the taxable value in the calendar year after the sale. That year the taxable value becomes equal to the SEV. From the following year the cap applies again, now starting from the new, higher number.
A worked example
Round, made-up numbers to show the effect. Real millage depends on the city or township and the school district.
| Seller this year | Buyer next year | |
|---|---|---|
| Taxable value | $130,000 | $200,000 (the SEV) |
| Millage | 45 mills | 45 mills |
| Yearly tax | $5,850 | $9,000 |
| If the buyer never files a principal residence exemption | Not affected | Up to 18 more mills, about $3,600 more |
Two forms to file after closing
Your title company often hands you both forms at closing. If you are selling, you rescind your own exemption on the home you leave with Form 2602.
- Property Transfer Affidavit (Treasury Form 2766). File it with the city or township assessor within 45 days of the transfer. Filing late on a home costs $5 a day, up to $200.
- Principal Residence Exemption affidavit (Treasury Form 2368). It exempts your home from up to 18 mills of local school operating tax. File it with the assessor by June 1 to count for the summer bill, or by November 1 for the winter bill.
Estimate it before you make an offer
Find the home’s SEV on the local assessing page or its tax bill, then multiply by the total millage your treasurer lists for that address. Kevin can pull these numbers with you before you write an offer, so the payment you plan for is the real one.
Sources
- Michigan Legislature, MCL 211.27a (taxable value and uncapping)
- Michigan Treasury, change of ownership
- State Tax Commission Bulletin 14 of 2025, inflation rate multiplier for 2026
- Michigan Treasury, Property Transfer Affidavit instructions
- Michigan Treasury, Principal Residence Exemption
- Michigan Treasury, PRE claim requirements
- Michigan Treasury, Form 2368
General information, not legal, tax or financial advice. Rules and rates change; check with the source, your title company or a tax professional before you rely on a number.