Mill Rate: Definition And How To Calculate Property Taxes

One of your biggest expenses as a homeowner is your property taxes. Although your mill rate, or millage, is something that you may not pay attention to, it does have a profound impact on your property taxes. If you want to calculate how much you'll owe in property tax, it's handy to know what this mill rate is and your assessed property value.

What Is A Mill Rate?

The mill rate is a tax rate used to calculate property taxes based on the assessed value of the property. It represents the tax owed per dollar of a property's assessed value. For instance, a mill rate of 10 means $10 in tax for every $1,000 of the property's assessed value. It helps determine how much homeowners pay in taxes based on the value of their property.

Property taxes are assessed to owners of most kinds of real estate and are used to help fund the local government. This tax revenue pay for services like public schools, parks, police and fire departments, infrastructure, public transportation, and recreational facilities.

How Do Millage Rates Work?

Each taxing authority, such as the city, county, school district, or other local entities, sets its own mill rate. Different taxes and levies each have their own millage, and their sum is the multiplier used to determine how much homeowners pay in property taxes.

These rates are applied to the home’s tax assessed value to determine the amount of tax owed to each specific agency. Government-appointed assessors determine the assessed value and can be the same as the market value of your home but is often lower. The actual property tax amount is the sum of the taxes levied by each agency based on their mill rates.

Mill rates may vary depending on the type of property, including residential, commercial, and industrial properties, or agricultural land. To find information regarding a property's millage, look at property tax statements, county or municipal websites, and tax notices, or contact the local tax assessor’s office.

Can A Mill Rate Change?

Local governments have the authority to adjust the mill rate up or down annually to meet financial needs. They may increase the mill rate to generate more revenue for essential services like education, infrastructure, or public safety, reflecting changes in budget requirements or community needs. Likewise, local governments might decrease the mill rate under various circumstances, such as when there's a surplus in revenue or property taxes have become unaffordable for many and relief is needed.

Mill rates can change for several reasons, including:

• Budgetary needs: Changes in local government budgets due to increased or decreased expenses for services, infrastructure, or public projects.
• Property assessments: Fluctuations in property values affecting the total tax base may necessitate adjusting the mill rate up or down.
• State funding: Reductions in state funding might prompt local governments to raise mill rates to compensate for the shortfall.
• Service expansion: Adding or improving services, such as schools, parks, or public safety, may require increased revenue via mill rate adjustments.
• Economic conditions: Economic downturns or growth can impact revenue needs, prompting mill rate adjustments up or down to balance budgets.

How To Calculate Property Tax With Mill Rate

Let's walk through calculating property taxes using the mill rate. Doing this requires knowing the following information:

• The assessed property value by the local government for taxation purposes
• The mill rates set by the different taxing authorities
• Once you’ve determined the total number of mills, multiply it by your property’s assessed value, then divide the answer by 1,000.

(Total mill rate x Property’s tax assessed value) /1,000

Millage Example

Let’s say the assessor determines your property to be worth $250,000.

In your local area, the total number of mills imposed on property is broken down into the following:

• School district – mill rate of 5
• County government – mill rate of 15
• Other levies – mill rate of 12

The sum is 32 mills (5+15+12).

To calculate the property tax:

• Take your home’s assessed value and multiply it by the total mills
• Divide by 1,000

$250,000 X 32 mills = 8,000,000

8,000,000/1,000 = $8,000 Total property tax

In some cases, property owners may be able to take advantage of property tax exemptions that decrease the total amount they owe. Common property tax exemptions include those for senior citizens, veterans, disabled individuals, and homestead exemptions for primary residences. Other exemptions might apply for agricultural land, historical preservation, or renewable energy installations to encourage specific activities or support certain groups.

The Bottom Line

Understanding how to calculate property taxes using the mill rate empowers you as a homeowner. By multiplying your property's assessed value by the relevant mill rate, you gain insight into the taxes you pay to different authorities. This knowledge enables better financial planning and a clearer understanding of how your property taxes are determined.

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