What is the 'Mill Rate'

The mill rate, also referred to as the millage rate, is a figure representing the amount per $1,000 of the assessed value of property, which is used to calculate the amount of property tax. The term "millage" is derived from a Latin word meaning "thousandth," with 1 mill being equal to 1/1,000th of a currency unit. As used in relation to property tax, 1 mill is equal to $1 in property tax, which is levied per every $1,000 of a property's determined taxable value.

Property tax is calculated by multiplying the assessed, taxable property value by the mill rate, and then dividing that sum by 1,000. The calculation formula is rendered as follows:

Property tax levied on property = (mill rate x taxable property value) divided by 1,000

For example, if the mill rate is 7 and a taxpayer's personal residence has a taxable value of $150,000, then, using the calculation formula, the homeowner's property tax bill for his residence is $1,050.

How Property Taxes are Determined

Property taxes are critical to funding the operations of municipal and other local government entities. Not all states levy income taxes, but all states do levy property taxes. Property owners are commonly assessed property taxes by more than one government entity, such as a municipality and a county. Government entities set mill rates based on the total value of property within the entity's jurisdiction, to provide the necessary tax revenue to cover projected expenses in their annual budgets, including such things as infrastructure, police and emergency services, and public schools. For this reason, and also because of fluctuating real estate values, a tax assessor typically updates the taxable value of property on an annual basis. Mill rates frequently vary between different types of property, such as residential, commercial or industrial properties.

Property tax is an "ad valorem" tax, which means it is based on value. The assessed tax value of property is calculated using local real estate data, and is usually a percentage of a property's fair market value, determined by multiplying the property's market value or appraisal value by an assessment ratio established by the local taxing authority. However, it's possible for the assessed tax value to be either higher or lower than a property's actual market value. If a property owner believes that his property has been assessed at an unreasonably high value, he can request a reassessment.

Some states have a homestead provision that exempts a specified dollar amount of a property's market value from assessment for property taxes. For example, in a state with a $50,000 homestead provision, only $150,000 of a $200,000 home would be subject to property taxes.


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