You found the house. You ran the numbers. You looked at the listing, saw the property taxes, and built your budget around them.
Then, a year or so after closing, a tax bill shows up that's noticeably higher than what you planned for.
If that happens, nothing went wrong, and nobody hid anything from you. It's just how property taxes work in Michigan, and very few buyers hear about it before they buy. Let's change that.
The Seller's Tax Bill Isn't Your Tax Bill
When you look at a listing, the property taxes shown are usually what the current owner pays. In Michigan, that number can be very different from what you'll pay once the home is yours.
The reason comes down to two numbers on every Michigan property: assessed value and taxable value.
Assessed Value vs. Taxable Value
Assessed value is roughly half of what your home is worth on the market. The City of Grand Rapids puts it this way: the assessed value "must not exceed 50% of the True Cash Value of the property." You may also hear it called the state equalized value, or SEV.
Taxable value is the number your tax bill is actually based on. Under Proposal A, Michigan caps how much a home's taxable value can rise each year while the same person owns it. The increase is limited to the rate of inflation or 5%, whichever is lower.
Those caps add up. For 2025, the inflation rate multiplier was 1.031, which allowed an increase of about 3.1%. For 2026, it's 1.027, or about 2.7%. Meanwhile, home values in West Michigan have climbed much faster than that over the last several years.
So if a seller has owned their home for a long time, their taxable value can be far below the home's assessed value. Their tax bill reflects years of capped increases.
What Happens When the Home Sells
Here's the part buyers rarely hear about. When a home sells, the cap goes away.
Michigan law says that after a transfer of ownership, the home's taxable value for the following year resets to match its assessed value. This is called "uncapping." The City of Grand Rapids gives a simple example: properties that changed ownership in 2025 have their taxable value set to their assessed value for the 2026 tax year.
In other words, you start fresh at today's value, not the seller's.
A Quick Example
Let's say a home is worth about $350,000 today. That puts its assessed value around $175,000.
The sellers bought years ago, and thanks to the annual cap, their taxable value is only $120,000. Their tax bill is based on that $120,000.
After the sale, the taxable value uncaps to $175,000. At the same tax rates, that's a tax bill roughly 46% higher than what the sellers were paying.
These numbers are just an illustration, and every home is different. But a gap like this is common, especially on homes that haven't changed hands in a long time.
The Second Piece: Your Principal Residence Exemption
There's one more factor that can move your bill: the Principal Residence Exemption, or PRE.
If the home is your primary residence, the PRE exempts it from local school operating taxes, up to 18 mills. That's a meaningful savings, but it doesn't happen automatically. You need to file Form 2368 with your local assessor.
The deadlines matter. You need to file on or before June 1 to receive the exemption on the summer tax bill, or on or before November 1 for the winter bill. If you're buying a home to live in, make filing this form part of your closing to-do list.
On the other side, sellers should file Form 2602 to rescind their exemption once the home is no longer their primary residence.
Don't Forget the Property Transfer Affidavit
After you buy, Michigan law requires you to notify your local assessor of the sale within 45 days using a Property Transfer Affidavit, Form 2766.
If you miss the deadline on a primary residence, the penalty is $5 per day, up to $200. It's a small form, but it's an easy one to forget in the excitement of moving.
Are There Exceptions?
Yes, a few. Under Michigan law, some transfers don't uncap the taxable value. These include transfers between spouses and certain transfers of a residential property to close family members, such as a parent, child, or sibling, as long as the home isn't used for a commercial purpose afterward.
If you're inheriting a home or buying from a family member, it's worth asking your assessor or a tax professional how the rules apply to you.
How to Plan for It
The good news is that this surprise is completely avoidable with a little planning.
• Look at the assessed value, not just the taxes. Ask your agent to pull the property's assessed value along with the current taxes, so you can see whether there's a gap.
• Use an estimator. The City of Grand Rapids has a free online Property Tax Estimator. For a future owner, it says to enter the assessed value. Other cities, including East Grand Rapids, offer similar tools.
• Talk to your lender early. Your lender can build a realistic tax estimate into your monthly payment, so your escrow doesn't come up short later.
• Budget for the year after closing. Remember that the reset happens the year after the sale, so your first tax bills may still reflect the seller's values. The bigger change usually comes later.
• File your PRE right away. If the home is your primary residence, don't leave money on the table.
A Note for Sellers
If you've owned your home for a while, your low tax bill is a perk you've earned. Just know that buyers and their lenders will be looking at what the taxes will be, not what they are today.
Being upfront about this helps buyers plan, keeps the deal from wobbling during underwriting, and builds trust from the start.
Final Thought
Property taxes aren't the most exciting part of buying a home, but they're one of the most important. In Michigan, the number on the listing is often just the starting point.
The buyers who feel confident after closing are the ones who planned for the full picture before they signed. That's exactly what I want for every client I work with.
If you're thinking about buying and want help estimating the real cost of a home, let’s connect. I'm always happy to walk through the numbers with you.
This article is for general information only and isn't tax or legal advice. Tax rules and figures change each year, so check with your local assessor or a tax professional about your specific situation.
