Understanding Assessed, Capped, & Taxable Value

This describes the different values that the Assessor's Office places on your home each year.

The passage of Proposal A in March of 1994 drastically changed the property assessment and taxation system. Some of the changes are hard to understand. One such change is the “Taxable Value cap.” The language in Proposal A stated that starting in 1995, the Taxable Value can be increased only by the amount of the Consumer Price Index (C.P.I.) or 5% (whichever is less) and for construction changes. However, other laws still require that the State Equalized Value (S.E.V.) is to be 50% of the current market value. The Capped Value and the S.E.V. could be totally different.

As a result, there will be three different “values” recorded for each property: State Equalized Value, Capped Value, and Taxable Value.

 

The Assessor is still required to estimate the market value of every property and record 50% of that as the Assessed Value. That value will eventually be referred to as State Equalized Value. In addition, the Assessor is also required to multiply individually each previous year's Taxable Value by the C.P.I. to calculate each individual Capped Value. The lesser of the two will be the Taxable Value for that property. Structural items not previously assessed, for example, new construction, are also added to Taxable Values.

In most cases, a property's Taxable Value will not be increased more that the previous year’s Taxable Value times the C.P.I. This “capping” process will continue annually until the ownership is transferred.

When a transfer of ownership occurs, the Taxable Value the following year will be based on the State Equalized Value that had been calculated annually.

 

TO SUMMARIZE:

State Equalized Value (S.E.V.)

equals . . .

Half of the Appraised Market Value.

Capped Value

equals . . .

Last year’s Taxable Value increased by the amount of the Consumer Price Index

(with a maximum of 5%), plus construction changes.

Taxbale Value

equals . . .

the lesser of the state equalized and Capped Values. Taxable Value can NOT be higher than the S.E.V. (Assessed Value). Taxable Value can still increase even if Assessed Value decreases as long as Taxable Value does not exceed (is lower than) Assessed Value.

**The Taxable Value will be used for the calculation of property taxes.**

 

EXAMPLE 1

A home had a S.E.V of $100,000 in 2016. The Taxable Value was $90,000. Sales of comparable homes in the neighborhood show that the market value has increased to $206,000. The annual C.P.I. is .9 %.
2017 S.E.V. is $103,000 (half of the appraised value of $206,000)
2017 Capped Value is $90,810 (90,000 x 1.009)
2017 Taxable Value is $90,810 (lesser of Capped Value and S.E.V.)

 

EXAMPLE 2

Same information as in Example 1, except that in this instance sale studies indicate that the market value has decreased to $175,000.
2017 S.E.V. is $87,500 (half of the appraised value of $175,000)
2017 Capped Value is $90,810 (90,000 x 1.009)
2017 Taxable Value is $87,500 (lesser of Capped Value and S.E.V.)

 

EXAMPLE 3

You bought a home in 2016. The S.E.V. was $95,000 and the Taxable Value was $78,432. Based on Comparable Sales, Market Value is now $200,000 for 2017. The 2017 C.P.I. is .9 %.
2017 S.E.V. is $100,000 (half of the Market Value)
2017 Capped Value is $79,138 (78,432 x 1.009)
2017 Taxable Value is $100,000 (Transfer of ownership removes the “Cap” and per State Law the S.E.V. becomes the Taxable Value)

2018-01-01
Review

Charter Township of Ypsilanti  •  7200 S. Huron River Dr. Ypsilanti, Mi 48197  •  (734) 484 - 4700

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