Understanding Property Tax Uncapping When Buying a Long-Held Home

If you’re buying a home in Michigan—or many other states—there’s a little-known but important concept you should understand: property tax uncapping. This especially matters when you’re buying a home that hasn’t been sold in many years.

Let’s break down what this means and why it could impact your future property tax bill.

What Is Property Tax “Capping”?

In Michigan, property taxes are generally based on a home’s taxable value, which increases by no more than 5% per year—or the rate of inflation, whichever is lower—thanks to Proposal A (passed in 1994). This “cap” helps long-time homeowners avoid large tax jumps year to year.

But Here’s the Catch: Taxes Uncap at the Time of Sale

When a home changes ownership, the taxable value resets to match the current market value (aka the State Equalized Value or SEV). This is called “uncapping” and it usually results in a higher tax bill for the new owner, especially if the property hasn’t sold in a long time and has appreciated significantly.

Example Scenario

Let’s say you’re buying a home from a family who’s owned it for 30 years. Even if the home is worth $300,000 today, their taxable value might be based on a much lower number—say, $150,000. But once you buy it, the taxable value uncaps and resets to reflect the current value. That means your property tax bill could double overnight compared to what the previous owner was paying.

What Buyers Need to Know

• Expect a jump in taxes: If the home hasn’t sold in years, be prepared for the taxable value to be significantly higher after closing.
• Ask your agent or title company for estimates: You can request a property tax projection based on the uncapped value to avoid surprises.
• Factor it into your monthly payments: If you’re escrowing taxes with your mortgage, your lender will adjust your payment accordingly after the first year.

Why This Matters

Property tax uncapping can be a dealbreaker for some buyers—especially if they’re budgeting based on the seller’s current tax bill. Knowing how it works lets you make a smarter, more informed offer.

Final Thoughts

Buying a home that hasn’t changed hands in years can be a great investment—but don’t let uncapped property taxes catch you off guard. Always ask about the taxable value, potential uncapping, and what that means for your wallet.

Have questions about how uncapping could affect your purchase? I’m happy to walk you through it—reach out anytime!