How the cap works
Under Proposal A, which Michigan voters approved in 1994, a home's taxable value can rise each year by only the rate of inflation or 5%, whichever is less, as long as the same owner keeps it. Taxes are figured on taxable value, not on market value.
Meanwhile, the home's state equalized value (SEV), which is about half of its market value, keeps up with the real market. Over years of ownership, a gap opens between the two.
What happens when a home sells
When ownership transfers, the cap comes off. In the year after the sale, the taxable value "uncaps" and resets to equal the SEV. From then on, the cap starts again with you as the owner.
That means if the seller owned the home for many years, their taxable value may be far below the SEV, and your first full tax bill can be much higher than theirs.
A simple example
These numbers are made up to show how it works; real tax rates vary by city, township and school district.
| Seller (owned many years) | You, the year after buying | |
|---|---|---|
| Market value | $500,000 | $500,000 |
| SEV (about half of market value) | $250,000 | $250,000 |
| Taxable value | $150,000 (capped) | $250,000 (uncapped) |
| Tax at an example rate of 40 mills | $6,000 a year | $10,000 a year |
In this example, your taxes would be about $4,000 a year higher than the seller's. That's more than $300 a month, which matters when you're figuring your mortgage payment.
How to plan for it
- Look up the SEV, not just the seller's tax bill. Most cities and townships publish assessing information online.
- Ask your Realtor to estimate your real tax bill before you make an offer. J.R. does this for every buyer.
- File your homestead exemption (Principal Residence Exemption) right away so you pay the lower homeowner rate.
- Include the higher taxes in your payment estimate. Use the mortgage calculator and enter the estimated new tax amount.
Frequently asked questions
When does my taxable value uncap?
In the year after the sale or transfer. For example, if you buy in 2026, the taxable value uncaps for the 2027 tax year.
Does uncapping happen with every transfer?
Most sales uncap the taxable value, but some transfers don't, such as adding or removing a spouse. Your assessor can confirm whether a specific transfer uncaps.
Do I need to file anything after I buy?
Yes. The new owner must file a Property Transfer Affidavit with the city or township assessor within 45 days of the transfer, and should file the Principal Residence Exemption affidavit to get the homeowner rate.
This guide is general information, not legal or tax advice. Rules can change; check with your assessor, title company or tax professional for your situation.