Property taxes are an important consideration when buying a home. Though you will eventually pay off a mortgage, property taxes are due twice annually for as long as you own the property. Property taxes vary depending on location, as well as the property value. In this blog post, we’ll use East Lansing and Okemos (Meridian Township) property taxes as examples as we compare property tax rates and how they are calculated.
Property Tax Rates in Greater Lansing: Okemos vs East Lansing
Mills and Millage Rates
Your property taxes are calculated through mills. Millage increases, which are often used for extra funding for schools, roads, public safety, libraries, or other needs, are sometimes proposed by local governments and approved or rejected through a majority vote. For example, Ingham County, which includes central, east and south portions of Greater Lansing, has approved and renewed millages to fund library programs since 2000.
One mill is one tenth of one cent. That means it takes ten mills to make a one cent tax on every dollar, which is 1%. Some millage rates are set and every taxpayer in a given area will pay the same rate. For example, all Michigan residents pay the same property tax millage rate to the State Education Tax, 6 mills, or .6%.
Some millage rates vary by location. These may be levied at the county level, municipal level (including townships or cities), or school district level. This means, though you may live in the same state, county and township as your neighbor, you may have different property tax rates if you are in different school districts. Or, you may be in the same state, county and school district, but in different townships or cities.
Depending on your location within these areas, your taxes can vary in the following ways:
Township or City: You may reside in the City of East Lansing, Meridian Township, Bath Township, or DeWitt Township.
County: All Meridian Township residents reside in Ingham County. East Lansing residents may reside in either Ingham County or Clinton County.
School District: Within these areas, you may reside in the East Lansing, Lansing, Bath, Dewitt, Okemos, Haslett or Williamston school district.
Perhaps the most significant factor determining your property taxes is the taxable value of your home and land. The market value and the taxable value of your property are two very different numbers. Market values can fluctuate a great deal. In a seller’s market, with low housing inventory and high demand, values will increase quickly, though neither the land nor the home have changed. This is, in part, why property taxes are levied based on a different amount.
In all areas of East Lansing and Meridian Township, the taxable value of your property cannot exceed 50% of its market value. That means, if you purchased your home at $200,000, the taxable value must be less than $100,000. The taxable value also cannot increase more than 5% per year while it is under the same ownership. However, properties are generally reassessed when they are sold, and the taxable value may increase significantly is the property has not been assessed in many years.
Homeowners who live in the home as their primary residence will pay less in property taxes than homeowners who own a rental home, vacation home, or investment property. If you live in the home, you can apply for a Primary Residence Exemption (PRE). This will reduce your taxes by up to 18 mills (1.8%) levied for local school district operating costs.
Example: Okemos Vs East Lansing
If you live in Okemos within Meridian Township, your property sits within the Okemos School District. Someone who lives in the City of East Lansing may reside in a number of school districts or townships. In this example, we will say our East Lansing resident lives in the city, township, and school district of East Lansing.
Each homeowner purchased a $200,000 home, which were both reassessed at a taxable value of $100,000. Their homes are also their primary residences, so they qualify for a PRE. (Please note: 2017 millage rates used below)
||PRE Millage Rate (2017)
||Annual Property Tax
If you itemize your income taxes, you can deduct all or part of your property tax payments. Before 2018, you could deduct any amount of property taxes on an itemized return. However, President Trump’s Tax Cuts and Jobs Act (TCJA) limited this and local income tax payments deductions to a combined total of $10,000.
In 2019, the City of East Lansing’s 1% income tax goes into effect. This also reduced property taxes by 5 mills (.5%). This may be particularly important for homeowners who primarily rely on retirement income, unemployment income, or military pay, which is not subject to the East Lansing income tax.
Homeowners with limited income may apply for a poverty property tax exemption. Disabled veterans may apply for the Veteran’s Property Tax Exemption.
Consider the property tax implications of your home’s location carefully as you look for a home. You may be able to live in the school district zone you want while avoiding some property taxes by living in a particular township. Keep in mind that you will need to pay your property taxes in addition to your mortgage, so factor this in when you calculate your mortgage payments.
City of East Lansing 2017 Property Tax rates: https://www.cityofeastlansing.com/ArchiveCenter/ViewFile/Item/574
Charter Township of Meridian 2017 Property Tax rates: http://www.meridian.mi.us/Home/ShowDocument?id=12926
City of East Lansing Treasury Department: https://www.cityofeastlansing.com/277/Treasury
Corrections: at the date of posting, Okemos and East Lansing PRE Millage Rates showed 2018 winter rates only. This has since been corrected with full-year 2017 rates.
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