Understanding Mill Rates: Calculate Your Property Taxes Easily

What Is the Mill Rate?

A mill rate, often referred to as the millage rate, determines the amount of property tax payable per dollar of a property's assessed value. Understanding how mill rates are calculated is essential as they form the basis of your property tax bill, which helps fund local government budgets, including infrastructure, public services, and schools. By knowing your local mill rate, often found on your property deed or through municipal offices, you can accurately calculate your property tax obligations. This guide will walk you through the determination of mill rates, how they combine different taxing entities' rates, and the steps to compute your property taxes accurately, enabling you to effectively plan your finances.

Decoding the Mill Rate for Property Taxes

 Mill rate, also called the millage rate, comes from the Latin word "millesimum," meaning thousandth, with 1 mill equaling 1/1000th of a currency unit. As used in relation to property tax, 1 mill is equal to $1 in property tax, which is levied per $1,000 of a property's determined taxable value.

You can find the millage rate for an individual property on the property deed itself or by calling your municipal tax office.  

How Mill Rates Are Established

The mill rate for your property depends on which agencies, like townships, counties, school boards, and emergency services districts, are taxing you. All these individual rates are combined to calculate your final property tax bill.

After the local government budget passes, known revenues are subtracted, leaving a deficit covered by property taxes. This amount divided by the town’s property value, multiplied by 1,000, gives the mill rate.

How to Calculate Property Taxes With the Mill Rate

Property taxes are calculated by multiplying the assessed, taxable property value by the mill rate and then dividing that sum by 1,000.

The property tax levied on a property can be calculated as follows:

(Mill Rate x Taxable Property Value) / 1,000 = Property Tax

For example, if the local mill rate is 7, this means that for every $1,000 of assessed value, $7 is owed in property taxes. If a taxpayer's personal residence has a taxable value of $150,000, then the property tax bill for their residence is:

(7 x 150,000) / 1,000 = $1,050

Factors Influencing Property Tax Calculation

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 taxes are often assessed by more than one government entity. For example, a single property may be assessed for both municipal and county taxes.

Government entities set mill rates on the total property value in their jurisdiction to raise tax revenue for expenses like infrastructure, emergency services, parks, and schools. For this reason, and also because of fluctuating real estate values, a tax assessor typically updates the taxable value of the property annually.

Property tax is an ad valorem tax, which means it is based on value. The assessed tax value is often a percentage of a property's fair market value, calculated using local real estate data and an assessment ratio set by the taxing authority.

Some states offer a homestead provision, exempting a portion of a property's market value from taxes. For instance, with a $50,000 homestead provision, only $150,000 of a $200,000 home is taxed.

The Bottom Line

The mill rate is simply a tax rate that is used to assess the property tax within a jurisdiction. It utilizes a specific calculation: 1 mill is equal to $1 in property tax levied per $1,000 of a property's assessed value. So a mill rate of 7 means that you pay $7 for every $1,000 of your property's assessed value. The assessed property taxes are then used to pay for government expenses within the area where the property is situated.