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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.

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