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A Principal Residence Exemption allows for up to 18 mills of local school operating taxes to be exempted from taxation. Using the above example, in 2019 a non-homestead property would have been billed $7,270.71 in taxes without administration fee. The millage rate would have been 72.7071 mills (0.0727071).
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The taxable value of a property is determined by the Assessor's Office. Under Proposal A, which was approved by voters in 1994, taxable value cannot increase faster than 5% per year or the rate of inflation, whichever is less, until the property transfers ownership. In the year following a transfer of ownership of property, the property's taxable value is half of the property's market value. Physical changes to a property (i.e., new construction) can also result in a property's taxable value increasing faster than the rate of inflation.
The worst case scenario would be that the taxable value was set at 50% of the market value, or $100,000 for a $200,000 home. Using the PRE (i.e., principal residence exemption or homestead) millage rate for the East Lansing school district for 2019, taxes would have been $5,525.42. The calculation formula is: Taxable Value x Millage Rate x 1.01 (1% administration fee) = TAXES or $100,000 x 0.0547071 x 1.01 = $5,525.42.
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