Which formula is used to calculate the capped value?

The formula for calculating capped value is based on the concept of how a property's taxable value is adjusted in Michigan to reflect inflation and any physical changes to the property. The correct approach involves taking the taxable value from the previous year, making adjustments for losses, and adding any new additions to the property.

This method ensures that the capped value reflects the maximum allowable increase in the taxable value from one year to the next, as defined in the Michigan General Property Tax Act. The formula includes:

• Taking the prior year's taxable value to establish a baseline.

• Subtracting losses to account for any property value decrease due to circumstances like destruction or demolition.

• Adding new improvements or physical additions to the property which can increase its overall value.

This calculated capped value ensures that property owners are not subjected to drastic tax increases annually as their property value fluctuates in the market, respecting both inflation and property modifications. This reflects a balanced approach to property taxation while adhering to state law.