Michigan Property Tax 2026: Proposal A, Taxable Value Uncapping & PRE

Michigan's property tax is structured by two constitutional amendments most residents have never read: Proposal A of 1994 (which caps annual taxable-value growth at inflation or 5 percent) and the Headlee Amendment of 1978 (which automatically rolls back millage when assessed values rise faster than inflation). The system rewards long-term ownership and penalizes buyers — the taxable value "uncaps" to market the year after ownership transfers. This 2026 guide explains how it all fits together.

How Michigan Calculates Property Tax

Michigan uses three distinct values, and the interaction between them is where the system's quirks live.

1. State Equalized Value (SEV) — 50 percent of true cash (market) value. Established each year by the local assessor and equalized by the county and state to ensure uniformity across jurisdictions.
2. Taxable Value (TV) — the lower of SEV or last year's taxable value increased by the Proposal A inflation cap (2.7 percent for 2026). This is the figure millage is applied to.
3. Millage — the combined rate of all local levies (county, township/city, school district, community college, library, etc.), expressed in mills per $1,000 of taxable value.

Because Proposal A caps how fast Taxable Value can rise, long-term owners often have TV well below SEV. A home that was purchased in 2005 might have SEV of $200,000 (matching a current $400,000 market value) but TV of only $130,000 — yielding a tax bill one-third less than a neighbor who just bought an identical home.

Proposal A: the 2.7% Cap for 2026

Article IX, Section 3 of the Michigan Constitution (as amended by Proposal A in 1994) caps year-over-year growth in taxable value at the lesser of:

• The Consumer Price Index (CPI) for the prior year, or
• 5 percent

The Michigan State Tax Commission publishes the official multiplier each year. For tax year 2026, the multiplier is 1.027, meaning Taxable Value can rise no more than 2.7 percent from tax year 2025.

Recent Proposal A caps (for context on how fast TV can rise):

Even with the cap, the cumulative effect of 5 percent caps in 2023 and 2024 meant many Michigan homeowners saw compounded 10 percent Taxable Value growth over two years — a meaningful bill increase absent a PRE or exemption.

Uncapping on Transfer of Ownership

When ownership of a property transfers, the Taxable Value "uncaps" — it resets to the current State Equalized Value (50 percent of market value) the following tax year. The buyer inherits the market-rate tax base, even if the prior owner held the property for decades under the Proposal A cap.

Exemptions from uncapping

Michigan law preserves the Taxable Value cap through several specific transfers:

• Transfer between spouses
• Transfer from a deceased owner to an heir who is a "qualifying relative" (child, grandchild, sibling, parent, or spouse of any of those) — as long as the property's residential use continues
• Transfer to or from a revocable trust where the grantor retains a beneficial interest
• Conveyances to a joint tenant with right of survivorship where the transferor retains an interest

The Michigan Department of Treasury maintains specific forms (L-4260 Property Transfer Affidavit, filed within 45 days of any transfer) that document whether uncapping applies. Missing the affidavit does not automatically trigger uncapping, but it can cause administrative complications and penalty assessments.

Principal Residence Exemption (PRE) — the 18-Mill Save

Michigan's PRE (formerly called the Homestead Exemption) exempts a principal residence from 18 mills of local school operating tax. On a $200,000 home with 50 percent SEV, that is an annual savings of approximately $1,800 — one of the largest single-line-item exemptions available in any U.S. state.

How to claim

File form L-4013 (Principal Residence Exemption Affidavit) with your local assessor. Deadline: June 1 for the exemption to apply to the July summer tax bill, or November 1 for the December winter tax bill. File once — the PRE continues automatically as long as the property is your principal residence.

Who qualifies

• Michigan residents who own and occupy the property as their principal residence on June 1 of the tax year
• The property must be a single-family residence, condominium, mobile home, or certain multi-family dwellings where the owner occupies one unit
• Only one PRE per household statewide — file a rescind (L-4080) on your prior Michigan home when you move

Conditional Rescission

If you are trying to sell your former primary residence and have already established a new PRE on another home, the Conditional Rescission (form L-4640) allows you to keep both PREs for up to three tax years while the old home is actively listed for sale. This prevents a double uncapping penalty.

Homestead Property Tax Credit (State Income Tax Credit)

Separate from the PRE, Michigan offers a Homestead Property Tax Credit on the state income tax return. It is a refundable credit against property tax (or a portion of rent for tenants), calculated as a percentage of the amount by which your property tax exceeds 3.2 percent of total household resources.

2026 eligibility

• Total household resources: $67,300 or less
• Taxable value of your home: $154,400 or less
• Maximum credit: $1,800 for non-senior filers; higher limits for seniors age 65+, the disabled, and veterans

How to claim

File MI-1040CR (standard) or MI-1040CR-2 (for farmers) with your Michigan state income tax return. Many Michigan homeowners eligible for the credit never claim it — free tax assistance sites (VITA, AARP) can help determine eligibility.

Headlee Amendment Rollback

Article IX, Section 31 of the Michigan Constitution (the Headlee Amendment, 1978) caps total property tax revenue growth for each taxing authority at the rate of inflation — not the rate of Taxable Value growth.

When Taxable Value growth outpaces inflation, the effective millage rate is automatically rolled back (the "Headlee rollback") so the total revenue grows only at the inflation rate. When voters approve a millage increase or new levy, the rollback is reset back to the authorized rate (a "Headlee override").

Practical effect: even a millage increase passed by voters may not produce the tax increase the ballot language suggested, because the Headlee rollback from prior years may partially offset the new levy. Conversely, a declining market that reduces Taxable Value growth can trigger the reverse — the rollback factor declines toward 1.0 and more of the voted millage reaches the homeowner's bill.

Appealing Your Assessment

Michigan's assessment appeal process is strict about timing and venue.

Step 1: Local Board of Review (March)

The local Board of Review meets in March (specific dates are posted on your assessment notice, which arrives in late February). You must appear in person or by authorized representative — written-only appeals are not accepted for residential property.

Step 2: Michigan Tax Tribunal

If dissatisfied with the Board of Review decision, file a petition with the Small Claims Division of the Michigan Tax Tribunal:

• Residential property: Deadline July 31 of the tax year
• Commercial/industrial property: Deadline May 31 of the tax year

Step 3: Court of Appeals

Tribunal decisions may be appealed to the Michigan Court of Appeals on questions of law, but the evidentiary record is fixed at the Tribunal level.

Common winning arguments

• Recent arm's-length purchase price below the assessor's valuation
• Comparable sales analysis showing SEV exceeds 50 percent of market value
• Physical errors on the property record card (square footage, bedroom count, missing structure)
• Incorrect classification (residential vs. commercial)

Frequently Asked Questions

What is the Proposal A cap for 2026 in Michigan?

The Michigan State Tax Commission set the 2026 Proposal A inflation multiplier at 1.027, meaning Taxable Value can increase no more than 2.7 percent from 2025 unless ownership transferred (which uncaps TV to current SEV). The cap is the lesser of CPI or 5 percent.

How does Michigan's Principal Residence Exemption work?

The PRE exempts your principal residence from 18 mills of local school operating tax. Apply by filing form L-4013 with your local assessor by June 1 (for summer tax) or November 1 (for winter tax). The exemption continues automatically as long as the property is your primary residence. On a $200,000 home, the PRE typically saves about $1,800 per year.

When does Taxable Value uncap in Michigan?

Taxable Value uncaps the year following any "transfer of ownership" — deeds, land contracts, most trust transfers, and foreclosures all trigger uncapping. Exceptions include transfers between spouses, transfers to qualifying relatives (child, grandchild, sibling, parent, or their spouses) where residential use continues, transfers to/from revocable trusts where the grantor retains a beneficial interest, and certain joint tenancy arrangements.

What is Michigan's Homestead Property Tax Credit?

A refundable state income tax credit for property tax paid in excess of 3.2 percent of total household resources. For 2026, eligibility requires total household resources of $67,300 or less and a taxable value of $154,400 or less. Maximum credit: $1,800 for most filers, with higher limits for seniors, disabled, and veterans. Claimed on MI-1040CR with your state income tax return.

When can I appeal my Michigan property tax assessment?

Appeals start at the local Board of Review in March (specific dates on your assessment notice). If unresolved, file a petition with the Michigan Tax Tribunal Small Claims Division by July 31 for residential property or May 31 for commercial/industrial. Missing these deadlines forfeits the appeal for that tax year.