Imagine buying a rental duplex in Grand Rapids in the summer, only to find your property tax bill jump unexpectedly in winter because of a local millage change. Or purchasing a vacation rental in Traverse City, but losing out on key exemptions because you missed a filing deadline.
For real estate investors in Michigan, understanding tax rules isn’t just a legal requirement — it’s the difference between profitable returns and costly surprises. Michigan’s unique property tax structure, local millage rates, and seasonal market trends can catch even experienced investors off guard.
In this guide, you’ll learn exactly what you need to know about Michigan’s real estate tax system — from property taxes and transfer taxes to exemptions, deductions, and local city programs. We’ll also share Michigan-specific examples and seasonal considerations to help you plan smarter.
Table of Contents
- Understanding Michigan Property Taxes
- Taxable Value vs. State Equalized Value (SEV)
- Michigan Real Estate Transfer Tax
- Homestead and Principal Residence Exemptions
- Rental Property Tax Considerations
- Short-Term Rental & Airbnb Tax Rules
- Seasonal and Weather-Related Tax Impacts
- Local Tax Incentives & Assistance Programs
- Tips & Warnings
- Conclusion
- FAQs
Understanding Michigan Property Taxes
Michigan property taxes are based on two values: State Equalized Value (SEV) and Taxable Value. Local governments — including cities, townships, and school districts — apply a millage rate to determine the final amount.
Example: If you own an investment property in Ann Arbor, your city millage rate will be different from a property in Flint, even if the market value is the same.
📸 Use here an image of Michigan property tax breakdown chart
Key Points:
- Tax bills are typically issued twice a year — summer and winter.
- Rates vary widely; for example, Detroit’s combined millage is higher than many suburban areas.
- Taxes fund schools, police, fire services, and infrastructure.
Taxable Value vs. SEV
State Equalized Value (SEV): Represents 50% of the property’s market value, as determined by local assessors.
Taxable Value: The number your property tax is actually based on. Thanks to Michigan’s Proposal A (1994), taxable value can only increase by the rate of inflation or 5%, whichever is lower — unless the property is sold, at which point it “uncaps” to match the SEV.
Example: If you buy a home in Lansing for $200,000, the taxable value may reset higher, leading to a larger tax bill than the previous owner had.
Michigan Real Estate Transfer Tax
When you buy or sell property, Michigan imposes a state transfer tax of $7.50 per $1,000 of sale price, plus an optional county tax of $1.10 per $1,000.
Example: Selling a $300,000 rental property in Kalamazoo means paying $2,250 in state transfer tax plus $330 in county tax.
Homestead and Principal Residence Exemptions
If you live in the property as your primary home, you can apply for the Principal Residence Exemption (PRE), which reduces school operating taxes.
Important for investors:
- Rental and vacation properties do not qualify for PRE.
- Misusing the exemption can result in penalties and back taxes.
Rental Property Tax Considerations
Rental income is taxable in Michigan, but you can deduct expenses like:
- Mortgage interest
- Property management fees
- Repairs and maintenance
- Depreciation
Example: If your Detroit rental generates $18,000 annually, but you spend $7,000 on expenses, you only pay income tax on the net profit.
Short-Term Rental & Airbnb Tax Rules
Short-term rental owners (Airbnb, VRBO) in Michigan must pay:
- State use tax (6%) on lodging revenue
- Possible local lodging taxes in tourist-heavy areas like Traverse City or Mackinac Island
Many municipalities are tightening short-term rental regulations, so always check local ordinances before listing.
Seasonal and Weather-Related Tax Impacts
Michigan’s seasonal market shifts affect taxable value assessments:
- Waterfront properties in Northern Michigan often spike in value after strong summer tourism seasons.
- Harsh winters may require additional maintenance costs — deductible for investors.
📸 Use here an image of Michigan winter home maintenance
Local Tax Incentives & Assistance Programs
- MI Home Loan – Offers down payment assistance up to $10,000 for eligible buyers.
- MSHDA Assistance – State housing support programs for buyers and certain rehab projects.
- Detroit Down Payment Assistance Program – Up to $25,000 in forgivable loans for primary residence buyers.
- Neighborhood Enterprise Zone (NEZ) Tax Abatement – Reduces property taxes for qualifying Detroit properties.
Tips & Warnings
✅ Do:
- Apply for PRE immediately if eligible.
- Keep detailed expense records for deductions.
- Check millage rates before buying in a new city.
🚫 Don’t:
- Assume your taxes will be the same as the previous owner’s.
- Forget about local lodging taxes for short-term rentals.
- Miss annual property tax payment deadlines — penalties in Michigan can be steep.
Conclusion
Navigating Michigan’s tax rules as a real estate investor isn’t complicated if you understand the key differences from other states. By learning how SEV, taxable value, and millage rates work — and taking advantage of local programs — you can maximize returns and avoid surprises.
Brick By Brick Investments is here to guide you through Michigan’s real estate landscape with local expertise.
FAQs
1. Do Michigan property taxes go up after I buy a home?
Yes, the taxable value “uncaps” to match the SEV when a property is sold.
2. Are rental properties eligible for the Principal Residence Exemption?
No, only owner-occupied primary residences qualify.
3. How often are Michigan property taxes billed?
Twice yearly — summer and winter tax bills.
4. Do Airbnb hosts in Michigan need to pay state taxes?
Yes, a 6% state use tax applies to short-term rentals.
5. Are there property tax breaks for investors in Detroit?
Yes, programs like NEZ can reduce taxes for certain properties.
6. What’s the transfer tax rate in Michigan?
$7.50 per $1,000 of sale price (state) plus $1.10 per $1,000 (county).
7. Can I deduct snow removal costs for my rental property?
Yes, as a maintenance expense for income-producing properties.
8. Do millage rates differ by city?
Yes, Detroit, Ann Arbor, and Grand Rapids have different rates.
9. Does Michigan have an inheritance tax?
No, but estate taxes may apply under federal law.
10. Can property tax be paid online in Michigan?
In most cities, yes — check your local treasurer’s website.