When you're looking at homes in Leelanau County, it's natural to review the property taxes along with the asking price, acreage, waterfront, square footage and other details.
But there is an important distinction buyers should understand: the property taxes the current owner is paying may not be a good indication of what you will pay after purchasing the property.
This is particularly relevant in Leelanau County, where many homes, cottages and waterfront properties have been owned by the same family for years—or even generations. Michigan's property tax system can allow a significant difference to develop between a property's taxable value and its current market value during a long period of ownership.
Understanding what happens when that property changes hands can help avoid an unwelcome surprise after closing.
Why the Seller's Tax Bill May Be Lower Than Yours
Michigan's Proposal A limits how quickly a property's taxable value can increase while it remains under the same ownership. Generally, annual increases are limited to the rate of inflation or 5%, whichever is less, subject to additions and losses.
Over time, that can make a substantial difference.
Consider a Leelanau County home that has been owned for 20 or 30 years. Its market value may have increased considerably during that period, while its taxable value increased at a much more limited rate.
That lower taxable value benefits the current owner. It does not necessarily transfer to the buyer.
When a qualifying transfer of ownership occurs, Michigan generally "uncaps" the property's taxable value in the following calendar year. At that point, taxable value is generally reset to the property's State Equalized Value, or SEV.
The Michigan Department of Treasury provides a detailed explanation of how transfers of ownership and uncapping work in its Michigan Transfer of Ownership Guidelines.
That's why simply looking at the seller's current tax bill can be misleading.
One other important point: the sales price does not automatically become the basis for the property's new assessment. Michigan assessors determine a property's true cash value according to state law; they do not simply take the purchase price and divide it in half to establish the new taxable value. The state's Transfer of Ownership Guidelines explain this distinction in more detail.
Why This Can Be Especially Important in Leelanau County
Leelanau County has an unusual mix of real estate: year-round residences, second homes, family cottages, farms, vacant land and some of Northern Michigan's most desirable waterfront properties.
Many have been held for a long time.
If you're considering a property that has been in the same ownership for decades, there may be a substantial difference between its taxable value and its State Equalized Value. That difference is worth understanding before you purchase.
This doesn't mean there is anything unusual or wrong with the property's current tax bill. It simply reflects Michigan's property tax system and the history of that particular property's ownership.
For buyers, the important question isn't just:
"What are the taxes now?"
It's also:
"What might the taxes look like after I own it?"
Your Principal Residence Matters, Too
Another important consideration is whether the property will be your primary home or a second home.
Michigan offers a Principal Residence Exemption (PRE) for qualifying properties that are owned and occupied as the owner's principal residence. The exemption removes a principal residence from up to 18 mills of local school operating taxes.
You can learn more about eligibility directly from the Michigan Department of Treasury's Principal Residence Exemption information.
A vacation home or second home generally does not qualify simply because you own it or spend a significant amount of time there. The property must meet Michigan's requirements for a principal residence.
This distinction can be particularly important in Leelanau County, where many buyers are purchasing seasonal homes or relocating from another community.
Two buyers purchasing similarly priced properties could therefore have different property tax bills depending on how the properties are used and whether they qualify for the exemption.
Property Taxes Can Vary Throughout Leelanau County
Where you buy also matters.
Property tax bills reflect multiple millages, which can include county, township or village, school and other voter-approved levies. As a result, the total millage associated with a property can differ depending on its location.
A home in Leland shouldn't automatically be compared with one in Suttons Bay, Glen Arbor, Northport, Empire, Lake Leelanau or another part of the county based solely on the seller's current annual tax bill.
The property's location, taxable value, applicable millages, exemptions and ownership history can all affect the final number.
That's one reason we encourage buyers to look beyond the tax figure shown on a listing when comparing properties.
What Buyers Should Look at Instead
The seller's current tax bill is still useful information. It just needs to be viewed in context.
When evaluating a Leelanau County property, take a look at both its taxable value and State Equalized Value (SEV). If there is a significant difference between the two, that's an indication that the current owner's taxable value may have been capped for some time.
Buyers should also consider whether the property will qualify as their principal residence and review the applicable local millage rates.
One particularly helpful resource is the State of Michigan's online Property Tax Estimator. It allows buyers to estimate property taxes and review millage rates for taxing jurisdictions throughout Michigan. Your Schaub Team Premier Realty can provide you this estimate before considering an offer.
Keep in mind that an estimate is still just that—an estimate. The local assessor is an important resource for questions about a particular property's valuation, and buyers should consult appropriate tax or legal professionals when their individual situation warrants it.
What Happens After You Buy?
For most typical sales that qualify as a transfer of ownership, the property's taxable value is uncapped in the calendar year following the transfer. Certain types of transfers are exempt from uncapping under Michigan law, so not every change in ownership is treated identically.
Buyers who will own and occupy the property as their principal residence should also make sure the appropriate Principal Residence Exemption paperwork is filed.
Michigan currently provides two annual filing dates for the PRE: June 1 for the summer tax levy and November 1 for the winter tax levy. Current requirements and deadlines can be found on the Michigan Department of Treasury PRE filing requirements page.
Your closing and title professionals can help identify paperwork associated with the transaction, but ultimately it's important for property owners to understand their own tax status and exemptions.
The Takeaway for Leelanau County Buyers
Property taxes are an important part of determining the true cost of owning a home, particularly when you're comparing properties in different parts of Leelanau County.
The biggest thing to remember is simple:
Don't assume the seller's current property tax bill will be your property tax bill.
A long-time owner may have a taxable value substantially below the property's current State Equalized Value. A new owner may experience an uncapping of that taxable value after the transfer. And whether the property will be your principal residence or a second home can make another meaningful difference.
None of that should discourage you from a property you love. It simply means property taxes deserve the same careful consideration as insurance, financing, inspections and other costs of ownership.
At Schaub Team Premier Realty, we've been helping buyers navigate Leelanau County real estate for generations. From waterfront homes and family cottages to village properties, acreage and year-round residences, our local experience helps our clients know what questions to ask before they make a decision.
If you're considering a property in Leelanau County, we're happy to help you understand the information available for that property and point you toward the appropriate local resources so you can make an informed decision.
