Detroit Property Taxes: The Truth About Uncapping and What You’ll Really Pay

Purpose of the video: Explains how to estimate property taxes after buying a house in Michigan, including special challenges in Detroit.

1. Background on Michigan taxes: When a home sells, its taxable value “uncaps” and resets to half of the market value (the SEV or State Equalized Value).

2. Annual increase limit: Once owned, taxable value can rise only 5% or the rate of inflation, whichever is lower.

3. Two helpful websites:

   • Detroit Parcel Viewer → find the property’s SEV.

   • Michigan Property Tax Estimator → plug in the SEV to calculate estimated annual taxes.

4. Accuracy check: The Michigan Property Tax Estimator was within about $123 of the speaker’s actual Detroit property tax bill—generally reliable outside Detroit.

5. Detroit’s complication: Property assessments are inconsistent because sales vary widely between distressed and renovated homes, making SEV estimates unreliable.

6. Investor workaround (and its flaw): Some estimate taxes by using 50% of their purchase price as SEV, but this can cause buyers to skip good deals or misjudge taxes.

7. Real examples:

   • Daughter’s Detroit home was underassessed (good outcome). She is in a $200,000+- neighborhood. She bought her house for $235,000. Her uncapped assessment was $51,000. Her nonhomestead taxes would be around $4,000.

   • Another property the speaker sells is overassessed (bad outcome). This is another $200,000+- neighborhood. The buyer is selling it for $165,000 (the same price he bought it for a year ago. The current assessment is $112,100. This buyer’s nonhomestead taxes will be over $8,000.

8. Better method: Research comparable uncapped sales from roughly 12–14 months ago with similar condition and features, ideally via MLS data or with help from a real estate agent.

9. Final advice:

   • Expect Detroit taxes to rise by the full 5% annually (inflation rule not followed).

   • Use both websites to estimate, but double-check neighborhood assessments to spot under- or overassessed areas.

Eli’s Tax Formula

How big is the jump? Easy math trick: Divide the new sticker (assessed value) price by the old one (taxable value). Say the old one's $13,000 and the new one's $64,000—that's 64,000 divided by 13,000, which is about 5 times bigger. So if you're paying $1,500 now, the new payment will be 5 times that: around $7,500. Ouch! (In real numbers from that house on 8880 Sorrento: old value $12,666, new $63,700—that's 5.02 times. Times $1,568 current taxes = $7,889 new ones.)

One sneaky thing: This big jump doesn't hit until the very next year after the sale. So if you buy super early, like in January, you get almost a whole extra year of the cheap old payment. It's like getting bonus playtime before the rules change.

It's not always a huge shock—sometimes the old and new prices are close, so the jump is tiny. But in some spots, houses get way more valuable over time, so yeah, it can sting.

More Math Equations

Key Concepts You Need to Know

First, a few things about how Michigan’s property tax system works in this context:

• Michigan’s Proposal A limits how fast your taxable value can increase year to year (no more than 5% or inflation, whichever is lower) — but when ownership transfers, the property “uncaps,” meaning taxable value resets to assessed value. City of Detroit+2Michigan+2

• “Assessed value” is generally 50% of market (true cash) value as estimated by the assessor. Garden City MI+3City of Detroit+3City of Detroit+3

• When the property is transferred, taxable value is adjusted upward (“uncapped”) to match that assessed value (or in some cases the state equalized value). City of Detroit+3City of Detroit+3Maddin Hauser+3

• After that, future increases are again capped (by inflation / 5%). City of Detroit+2City of Detroit+2

• The tax you pay = (taxable value) × (millage rate / 1000). Maddin Hauser+4City of Detroit+4City of Detroit+4

Because of this “reset” (uncapping), the tax bill you inherit (or see on the listing) might be much lower than what your tax will be in the first year you own it.

Example (Hypothetical)

Let’s run a simple example so you see how big the difference might be:

• You buy a house and estimate market value at $200,000

• Assessed value (50%) = $100,000

• So after uncapping, taxable value might be ~$100,000

• Suppose Detroit + county + school + special millage = 70 mills (i.e. 0.070)

• Tax = 100,000 × (70 / 1,000) = $7,000 per year

• If the previous owner’s taxable value had been “capped” lower (say $80,000), their tax would have been 80,000 × 70/1,000 = $5,600. So you as new buyer pay maybe ~$1,400 more in that first year.

This is just illustrative — actual millage and values vary.

Things That Make Estimates Hard / Things to Watch Out For

• Millage variation: Different parts of Detroit might have extra school district, special assessments, or local millages that change the rate.

• Exemptions & credits: You might qualify for principal residence exemptions, neighborhood enterprise zone incentives, or other reductions.

• Improvements or additions: If you add a structure (garage, addition, pool), that may increase assessed value beyond just the reset.

• Assessment lags: The official assessed value might lag market moves.

• Timing and “transfer of ownership” definitions: Not all transfers “uncap” — some transfers are exempt (e.g. transfers between spouses or certain trusts) under Michigan law. Michigan+1

12-14 Month Search Results in Regent Park Detroit

A potential buyer asked me if my quote was correct on the uncapped taxes for 16697 Bringard. This is my reply.

The way to figure out how a house will uncap is to see how high they uncapped in the vicinity.  I took houses that sold between 12 and 14 months ago and looked at their SEVs.

16867 Carlisle  Sold $50,000. SEV $40,100

16916 Carlisle Sold $65,000 SEV 44,700

16700 Eastburn sold $82,500 SEV 37,300

16623 Fairmount Sold $119,900 SEV 37,300

16509 Collingham sold $142,000 SEV 44,400

I averaged them out and got 40,760.

I looked at the current SEV for 16697 Bringard.  It's at $39,900.  I put that in the Michigan Property Tax Estimator website to do the uncapping calculations.  That's how I got that your taxes could be around $3,448.

But if I use the average for how they truly uncap within a .25 radius and I use that SEV of 40,760, the taxes could be $3,522.  If you do worst-case scenario and take the highest assessed house in that vicinity whose SEV is 44,700, the taxes could be $3,862.

It's amazing how wildly different they are all in the same area.  The assessor is supposed to take the average arm's length transactions to come up with an assesed value.  The assessed value should be half of the purchase price on an arm's length transaction.  Detroit is all over the place though.  The assessments in that neighborhood should be around 30,000 to 40,000, if they were to average in the somewhat distressed properties too like the $50,000 sale.  The $142,000 is an anomoly and it's not supposed to be used for the whole area.  It's not.