West Michigan Real Estate Blog | Luke Bouman Team

By Luke Bouman | Luke Bouman Real Estate Team | September 2026

Property taxes are one of the most misunderstood costs of homeownership in Michigan, and the surprises usually come after closing. The Michigan system has some specific quirks, especially around what happens to taxes when a home changes hands, that every buyer should understand before budgeting. Here is a plain-language guide.

Taxable Value vs Assessed Value

Michigan property taxes are based on taxable value, which is not the same as market value or even assessed value. For an existing owner, annual increases in taxable value are capped by law, which keeps taxes from rising sharply year to year. This is important because the taxes the current owner pays may be well below what a new buyer will pay.

The Uncapping Event

Here is the surprise that catches buyers. When a home is sold, its taxable value uncaps and resets to the state equalized value, which is roughly half of market value. This can mean the property taxes you pay as the new owner are meaningfully higher than what the seller was paying. Never budget based on the seller's current tax bill. Estimate your taxes based on the uncapped value.

The Homestead Exemption

Michigan offers a Principal Residence Exemption, often called the homestead exemption, that reduces the tax rate on your primary residence by exempting it from certain school operating taxes. Make sure to file for it if the home will be your primary residence, and understand that a second home or investment property does not qualify, which means higher taxes on those.

Budgeting Accurately

Before buying, ask your agent or the local assessor to estimate the taxes based on the uncapped value, not the current bill. This one step prevents the most common post-closing budget shock. The Luke Bouman Team is the Lakeshore's most reviewed real estate team, with 450+ five-star Google reviews and over 1,000 five-star reviews across all major platforms. Call (616) 344-9923.

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