Which of the following best describes a capped value?

A capped value refers to a value that is determined by a specific formula or set of guidelines established by statutes. In the context of property taxation in Michigan, the capped value is used to limit the increase in a property's taxable value from one year to the next. This is particularly important to ensure that property taxes do not rise excessively due to fluctuating market conditions.

The capped value is calculated based on the prior year's taxable value, adjusted for inflation, as well as any changes such as new construction or improvements to the property. This method aims to provide stability for property owners and avoid sharp increases in tax liability resulting from rapid market appreciation.

Other options do not accurately reflect the nature of a capped value. The marked sale price of a property (the first option) can vary widely based on market conditions and is not a predetermined value; therefore, it does not define capped value. The second option, suggesting the homeowner primarily determines the value, is incorrect since the capped value relies on statutory standards rather than individual homeowner input. The fourth option indicates a flat tax rate, which is unrelated to the concept of capped value. Capped value specifically deals with the calculation of property worth for tax purposes, rather than tax rates themselves.