Michigan real estate: property tax, closing costs & insurance
Michigan’s Proposal A uncaps the taxable value to the State Equalized Value (50% of market value) on every transfer, then recaps growth at the lesser of inflation or 5% until the next sale — a two-step mechanism that trips up many out-of-state buyers.
Property tax in Michigan
The effective rate runs about 1.38% of assessed value. Residential property is assessed at 50% of market value before that rate applies, so the millage number quoted locally is not applied to the full price. Proposal A: taxable value uncaps to SEV (50% of market) on transfer; then capped at min(CPI, 5%). PRE exempts 18 school mills. Annual assessment growth is capped at 5% for an owner-occupant.
Transfer tax & closing costs
State $3.75/$500 + county $0.55/$500. Recording runs a flat $30. Title insurance is customarily paid by the seller, with a minimum owner’s premium of $250.
Insurance & capital gains
Flat 4.25%; Detroit city 2.4%.
Worked example: a $350,000 ARV flip in Michigan
Six-month hold, $45,000 rehab, 15% target profit margin, all-cash. This is the same reverse waterfall the calculator runs — see it live for your actual property.
- After-repair value$350,000
- Rehab budget−$45,000
- Closing costs — acquisition−$5,875
- Closing costs — disposition−$21,410
- Holding costs, 6 months−$3,234
- Target profit, 15%−$52,500
- Maximum Allowable Offer$221,981
If you’re investing
Never assume the seller’s current tax bill carries over. Michigan’s Proposal A explicitly uncaps taxable value to SEV at transfer, so a long-held property’s artificially low tax bill resets upward the moment you close — underwrite the post-sale number, not the listing’s current number.
If this is your home
The Principal Residence Exemption (PRE) removes up to 18 school operating mills for an owner-occupied home — file it promptly after closing, since an investment purchase or slow paperwork can leave you paying the higher non-homestead rate longer than necessary.
Best suited for: Investors willing to underwrite the post-sale uncapped tax basis correctly; Midwest price points with straightforward insurance costs.
Michigan FAQ
What is Michigan’s Proposal A and how does it affect buyers?+
Proposal A caps annual taxable-value growth at the lesser of inflation or 5% for an existing owner, but uncaps the taxable value to State Equalized Value (about 50% of market value) on any transfer of ownership — so a new buyer’s first tax bill is based on the reset value, not the seller’s prior capped bill.
See the exact number for your Michigan property
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Other state guides
Sources: state and county assessor publications, state department of revenue transfer-tax schedules, and title-rate manuals filed with each state’s insurance regulator, effective 2025-01-01. Figures are estimates for planning purposes, not tax or legal advice — confirm with a licensed professional before closing. How the calculator works