Taxable v.s. Assessed Property Values

There is much to know about the assessment of real property. Knowing the difference between taxable and assessed property values can be very important when owning a home. When you are looking to purchase you can find out the millage rates and also the assessed and taxable values for each home. The greater the difference is between the assessed and taxable values, the longer someone has lived in the home. At the point of sale the taxable value will become uncapped and upon assessment will raise closer to the assessed value. Therefore, it is important when looking at a home to buy, to calculate taxes based on current millages and the assessed value. After you've occupied the home as your residence and as time passes, the taxable and assessed values will again begin to separate in amounts. It used to be that when considering multiplying the assessed value by two that would be approximately what the home would appraise for. In today's market this is not necessarily true and usually isn't a good tool to use for figuring a home's approximate value. One other thing to consider is whether you will occupy a home as a primary residence or as a second home/rental property. This is important in determining what millage rates to use for tax amounts. Many cities and townships now have assessing information available on their website, which can make for an easier time in finding what you need. The calculation to use to determine monthly taxes is as follows:

Example - Assessed Value: $45,000 Taxable Value: $32,000
Summer Tax total millage: 32 Winter Tax total millage: 4

Summer: 45 x 32 = 1,440/12 = 120/month
Winter: 45 x 4 = 180/12 = 15/month
TOTAL property monthly tax = $135/month

**Keep in mind that when refinancing your current home there is no need to compare assessed and taxable values (unless for curiosity sake).

Here are answers for two frequently asked questions, answered by the City of Grand Rapids, MI assessor:

How is property assessed?

Real property assessments are based on market values and are assessed yearly by the assessor's department. Assessment notices are mailed to taxpayers of record in January of each year. An important part of assessing property is the appeal process. Real property assessments can be appealed at the March board of review. Personal property assessments originate from a filing of a statement by the taxpayer. If a personal property statement is not furnished the assessor, he/she is authorized to assess such amount of personal property as deemed reasonable and just. The business property owner is required by law to report the value of property owned on a personal property statement form provided by the local assessor. Assessment notices are also mailed to business personal property owners in January of each year. Personal property assessments can also be appealed at the March board of review.

What is the difference between assessed value and taxable value?

Taxable value (TV) is the value used to compute your tax bill and applies to real property only. "TV" is determined yearly as the LESSER of assessed value (market based as determined by assessor) and capped value. Capped value is the prior year's taxable value, less taxable value of losses, "capped" by an increase of the lesser of 5% or the rate of inflation, plus assessed value of additions. Taxable value becomes uncapped when property is sold or transferred.