True Cash Value, Assessed Value, and Taxable Value in Relation to Assessor
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True Cash Value, Assessed Value, and Taxable Value in Relation to Assessor

December 2015

True cash value, assessed value, and taxable value (which has no relation to true cash value) are fairly complicated terms and concepts with specific statutory definitions. Understanding these terms and concepts is vital to understanding the role of a township assessor.

True Cash Value

True cash value is defined by statute as "the usual selling price of a property… being the price that could be obtained for the property at private sale, and not at an auction…or at forced sale" (with some exceptions). MCL 211.27(1). In determining the true cash value of a property, an assessor must consider the advantages and disadvantages of location; quality of soil; zoning; existing use; present economic income of structures, including farm structures; present economic income of land if the land is being farmed or otherwise put to income producing use; quantity and value of standing timber; water power and privileges; minerals, quarries, or other valuable deposits not otherwise exempt and known to be available in the land and their value.

Assessed Value

Assessed value is a maximum of 50% of the property's true cash value. A property's assessed value is important as it relates to the property's true cash value because, upon transfer of the property, a property's taxable value becomes uncapped. The assessed value then becomes the property's taxable value. A determination of assessed value includes many factors, such as the sale of comparable homes and the results of home inspections.

Taxable Value

Contrary to what many believe, taxable value has no relation to true cash value. Property taxes, however, are directly related to taxable value. The amount of property tax levied on a specific parcel of property is determined by multiplying the taxable value by the millage rate, then dividing the sum by 1,000. Pursuant to Proposal A, a property's taxable value cannot increase on an annual basis by more than 5% or the rate of inflation, whichever is less. Exceptions to that rule are additions to property and transfers of property, each of which "uncaps" the taxable value to match the assessed value (50% of the true cash value). A property's taxable value cannot be higher than its assessed value.

For more information regarding these issues, be sure to attend the 2016 Michigan Township Association Conference & Expo, Ross K. Bower II, and others, will be discussing "What Every Elected Official Needs to Know about Assessing" on Wednesday, January 20 from 1:00pm to 2:15pm.

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