What is the maximum percentage increase allowed in property taxable value in Michigan?

In Michigan, the maximum percentage increase in a property’s taxable value is established by the Headlee Amendment, which restricts the increase to 3% or the rate of inflation, whichever is less. This provision is designed to ensure that property taxes do not increase disproportionately compared to inflation and protects property owners from sudden spikes in tax assessments.

When calculating the taxable value year over year, if inflation rates fall below 3%, then the increase in taxable value is limited to that lower rate. This mechanism aims to maintain a balance between the needs of local governments for revenue and the financial burden on property owners, reflecting the state's commitment to manageable property taxation.

In contrast, other options provided do not align with Michigan’s regulations. An increase of 5% each year exceeds the limit established by the Headlee Amendment. There is also no provision for unlimited increases as suggested by the option indicating no limit, as this would create significant financial strain on homeowners. Moreover, a fixed annual increase of 1% does not reflect the allowance for inflation adjustments and does not accommodate situations where inflation may dictate a higher permissible increase within the 3% cap.

Thus, the correct answer accurately represents the legal framework governing property taxable value increases in Michigan.