What is Millage Rate
The millage rate is the amount per $1,000 of property value that is used to calculate local property taxes. Assigned millage rates are multiplied by the total taxable value of the property in order to arrive at the property taxes. School boards also use millage rates to calculate local school taxes to be collected based on a derivation of the total property value within school district boundaries.
BREAKING DOWN Millage Rate
The term gets its name from the Latin word "millesimum," or "mill" for short, which means "thousandth part" (1/1000). Millage rates are often expressed mathematically with the symbol %o, as in 1%o, which is one part per thousand, or 0.1%.
Millage rates for individual properties are usually found on the property deed itself. Frequently, these taxes are labeled in "mills," with one mill representing $1 in tax per $1,000 in tax-assessed value.
How to Apply Millage Rates
With the property's tax-assessed value and the total assigned millage rate, a homeowner may calculate annual property taxes. 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. However, in other places, tax-assessed values can equal as little as 10% or less of the market value. The millage rate has an impact on the property's tax-assessed value.
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. 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 * .07).
Where Millage Rates Come From
Usually, in areas where property taxes are calculated in mills, several discrete taxing authorities, each with millage rates, combine rates to calculate the total tax liability of a property. These entities include counties, municipalities, emergency services districts, community colleges, and school boards.
Regarding the above example, 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.