What Is the Mill Levy?

The mill levy is the assessed property tax rate used by local governments and other jurisdictions to raise revenue in order to cover annual expenses. The mill levy is calculated by determining how much revenue each taxing jurisdiction will need for the upcoming year, then dividing that projection by the total value of the property within the area, and finally adding up the rate from each jurisdiction to get the mill levy for the entire area.

The Basics of a Mill Levy

There can be several taxing authorities in one region, which could include school, county and city districts. When it comes to the mill levy, the rate of taxation is expressed in mills. This mill levy is set to determine how much the taxable value of your property will be charged in real estate taxes.

Each year, the official assessed value of a property is usually set by a tax assessor and may be used to set the mill levy. In some cases, a percentage of the market value of the property can be used to set the mill levy instead.

To determine what the mill levy will be, divide the amount of money needed to be raised through the real estate tax by the taxable value of the land within the jurisdiction. From there, go ahead and multiply the result by 1,000.

Real World Example

As an example, if the entire property value in the area is $1 billion, and the school district needs $100 million in revenue, the county needs $10 million and the city needs $50 million. The tax levy for the school district would be $100 million divided by $1 billion or 0.10. The tax levy for the county would be 0.01 (10 million/1 billion), and the tax levy for the city would be 0.05 (50 million/1 billion).

Add all the tax levies up, and you get a mill levy of 0.16 or 160 mills (one mill = 0.001).