Property Tax Calculations, Millage, and Tax Limitations
Property Tax Calculations, Millage, and Tax Limitations
This domain tests the arithmetic of the tax bill and the constitutional and statutory limits that constrain it. Expect calculations using taxable value, millage conversions, PRE savings, and Headlee/Truth in Taxation concepts.
Core rules
- One mill is $1 of tax per $1,000 of taxable value. Tax = taxable value × total millage ÷ 1,000.
- The tax base is taxable value, not SEV or true cash value. Taxable value is the lower of SEV or capped value; it resets to SEV on a transfer of ownership and increases only by the inflation rate or 5%, whichever is less, plus additions and minus losses.
- Millage includes local operating, debt, school operating, intermediate school, and state education tax. The 6-mill state education tax applies to all property; the 18-mill school operating levy is generally exempt for a principal residence.
- The Headlee Amendment requires a millage rollback when taxable value growth exceeds the inflation rate, unless voters restore the rate. Truth in Taxation requires notice and a hearing before a city or township takes an operating millage increase above the rollback.
- Voted millage, debt millage, and charter millage have different limitation treatment; read the ballot language and the levy certification.
Worked example
A homestead has taxable value of $180,000. Total millage is 42 mills, including 18 mills of school operating. Without the PRE, tax would be $180,000 × 42 ÷ 1,000 = $7,560. With the PRE, subtract the 18 school operating mills: $180,000 × 24 ÷ 1,000 = $4,320, a savings of $3,240. If the property were non-homestead, the full 42 mills would apply.
Traps
Do not multiply SEV by millage when taxable value is lower. Do not apply the PRE to debt or local operating millage. Do not treat a Headlee rollback as a permanent loss of voter-approved millage; it can be restored by vote. Do not forget that 1 mill is not one dollar per $100 of value.