Kemp Klein

Are Your Annual Property Taxes Too High?

By: Jeremy Cnudde

Shortly you will receive your new Notice of Assessment from your local property tax assessor.  What is this, what does this really mean and what should you do with it?  A quick yet careful review will help you determine whether your annual property tax expense is too high.

Your Notice of Assessment will have two values stated for the most recent years. The Assessed Value and the Taxable Value. These might be very different numbers.  Assessed Value is equal to one half of the True Cash Value.  True Cash Value (which isn’t stated on the Notice) is generally speaking the fair market value, or the value determined between a willing buyer and a willing seller, assuming that the sales price was not impacted by outside factors.  The sales price is and should be a primary factor considered in determining True Cash Value.  The Taxable Value starts with the Assessed Value and is annually adjusted. This adjustment is subject to a “cap” on how quickly the value can increase year over year, except in a year of a transfer of ownership in which it resets to equal the Assessed Value.  This cap limits annual increases to the lesser of inflation or 5%.  Over time the Taxable Value will be lower than Assessed Value.  Your taxes are based upon the tax rate times the Taxable Value.

You also need to review the changes; was there a significant increase?  The Assessment will state either “there was” or “there was not” an addition to the property or a change in ownership.  If you had no addition and no ownership change there should not be a significant change year over year.  Further, you can verify the classification as “industrial real” or “commercial real” property.  Sometimes it shows as a number “201” or “301.”  Did this classification change since last year?  

When you receive the Notice of Assessment from the local assessor, review the values and changes carefully. Is two times the Assessed Value what you think the property is worth today? Some Michigan communities and properties are still being assessed at above market rates. If your property taxes have not been appealed in the last five years or you have recently purchased or refinanced debt on the property, we may be able to reduce your tax expense.

Kemp Klein’s tax team represents clients that own or lease industrial or commercial real property, which includes commercial, grocery, office, engineering, manufacturing, warehousing, assisted and independent living facilities.

For questions about Property Taxes contact us.