How does taxable value increase after a property is sold?

The correct answer provides an important concept in property taxation related to how taxable value is determined following a sale. After a property is sold, the taxable value indeed only increases by inflation or up to a maximum of 5%, reflecting the relationship between property value appreciation and how assessed values are adjusted according to Michigan’s Proposal A.

Under this policy, when a property changes hands, the taxable value can potentially reset to the property’s sale price (the market value), but it’s important to note that it will not exceed the previous taxable value increased by the inflation rate or 5%, whichever is less. This mechanism is designed to control tax increases on homeowners due to rising property values while still allowing some adjustments to ongoing tax assessments to reflect economic realities.

This approach ensures that while market values can fluctuate, the taxable value remains relatively stable and predictable for property owners, thereby providing a degree of protection against rapid increases in taxation.