Next video:
Loading the player...

Property taxes are calculated through use of the mill levy and the assessed property values.

The mill levy is the tax imposed on property values. One mill equals one tenth of one cent. For every $1,000 of property value, one mill equals $1. Generally, a city, county and school district can levy tax on properties in their area.

As an example, if property values in a county equal $100 million, and the county needs $1 million in tax revenues, the mill levy will be 1%. If the city and school districts in that same county imposed mill levies of .5% and 3%, than the total mill levy for the region would be 4.5%, or 45 mills.

Property taxes equal the mill levy multiplied by a property’s assessed value, which is a yearly estimation of its market value. Assessors review local real estate conditions and all relevant information, then they value the property through one of three methods:

  1. They perform a sales evaluation, which looks at similar sales in the area
  2. They look at how much it would cost to replace the property, or  
  3. They consider how much rental income the property would generate.

After determining the property value, assessors multiply the property’s actual value by an assessment rate to figure its assessed value. Assessment rates are a uniform percentage in a tax jurisdiction. The assessment rate is multiplied by the mill levy to determine the tax.

For example, say a property valued at $500,000 has an assessment rate of 8%. The assessed value is $40,000. The mill levy of 4.5% of $40,000 leaves a property tax of $1,800.

Related Articles
  1. Taxes

    This Is How Property Taxes Are Calculated

    Understanding how property taxes work will ensure that you won't be overcharged.
  2. Investing

    Your Property Tax Assessment: What Does It Mean?

    The amount of a property tax bill is based on the property’s value, the exemptions it qualifies for, its use and the local property tax rate.
  3. Taxes

    Your Property Tax Assessment: What Does It Mean?

    Understanding your property taxes can protect you from financial shocks.
  4. Investing

    General Mills Stock Trades Ex-Dividend Thursday (GIS)

    General Mills will send its dividend payment on August 1 to shareholders of record as of July 11.
  5. Taxes

    The 7 Best States For Property Taxes, and Why

    Understand why some states have high property taxes while others have low property taxes. Learn about the states with the lowest property taxes.
  6. Investing

    General Mills Mentioned as Takeover Target (GIS)

    An offer of $86 per share amounts to a premium of 35%, a hefty premium.
  7. Investing

    Analysts Bite General Mills, Downgrade to Hold

    Stifel Nicolaus downgrades the food giant's shares to hold along with $60 price target.
  8. Investing

    General Mills Reports Mixed Q4 Results

    The food giant's cost savings helped boost EPS above estimates, despite weakness in the U.S.
  9. Taxes

    What is an Ad Valorem Tax?

    An ad valorem tax is a levy placed on real or personal property based on the assessed value of that property.
  10. Investing

    Use Real Estate To Put Off Tax Bills

    Find out how you can build wealth and reduce your taxes.
Hot Definitions
  1. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
  2. Private Placement

    The sale of securities to a relatively small number of select investors as a way of raising capital.
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. Backward Integration

    A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it ...
  5. Pari-passu

    A Latin phrase meaning "equal footing" that describes situations where two or more assets, securities, creditors or obligations ...
  6. Interest Rate Swap

    An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for ...
Trading Center