Millage Rate

What Is a Millage Rate?

A millage rate is the tax rate used to calculate local property taxes. The millage rate represents the amount per every $1,000 of a property's assessed value. Assigned millage rates are applied to the total taxable value of the property in order to arrive at the property tax amount.

Millage gets its name from the Latin word "millesimum," or "mill" for short, which means "thousandth part" (1/1000). The term millage rate is also referred to as the mill rate or the effective property tax rate.

Different agencies within a municipality may have their own millage rates, which are factored into a homeowner's property tax calculation. For example, school boards use a millage rate to calculate local school taxes based on a derivation of the total property value within school district boundaries.

Key Takeaways

  • Millage rates are the tax rates used to calculate local property taxes.
  • The rate represents the amount a homeowner has to pay for every $1,000 of a property's assessed value.
  • Homeowners can calculate annual property taxes using the property's tax-assessed value and the total assigned millage rate.

Understanding Millage Rates

Property taxes are determined by local governments and paid by homeowners. These taxes are based on a property's value, which accounts for both the structure and the land on which it sits. Millage rates for individual properties are usually found on the property deed itself.

Some municipalities use the term millage rate or mill rate when they refer to the property tax rate. One mill is equal to one one-thousandth of a dollar—or $1 for every $1,000—of property value. Millage rates are often expressed mathematically with the symbol %o, as in 1%o, which is one part per thousand, or 0.1%. Thus, 30 mills are the equivalent of $30 for every $1,000 of the assessed value of a property.

As noted above, the amount of tax a homeowner pays is based on the assessed value of the property. An assessor appointed by the local government evaluates the property every one or five years—depending on the municipality—and determines its assessed value. This value is only used to calculate property taxes.

Calculating Millage Rates

A homeowner's annual property taxes are calculated using the property's tax assessed value, and the total assigned millage rate. A home's tax assessed value is a percentage of its market value. In some locations, the assessment of tax is on 100% of the market value, while the tax-assessed values can equal as little as 10% or less of the market value in other municipalities. Millage also impacts the property's tax assessed value as mills are assigned by the municipality.

For example, consider a home with a market value of $200,000 in an area where the tax-assessed value equals 20% of the market value. As a result, the homeowner property tax has a basis of $40,000. Let's say the home's total millage rate is 70 mills (70/1000), which means for every $1,000 assessed value, $70 in property taxes is due. Therefore, the homeowner owes $2,800 in property taxes: ($40,000 x 7%).

Where Millage Rates Come From

Millage depends, in part, on the level of services that the property uses from the town or municipality. Each public service charges a certain amount of tax millage to property owners for the use of their services.

Several taxing authorities—each with millage rates—combine their rates to calculate the total tax liability of a property. These entities include counties, municipalities, emergency services districts, community colleges, and school boards.

If we use the example above, the millage rate is likely a combination of several millage rates imposed by different taxing authorities. For example, the county charges 20 mills, the municipality charges 15 mills, the emergency services district charges ten mills, the local community college charges ten mills, and the school board charges 15 mills, with the sum of the rates totaling 70 mills.