MILLAGE RATE: Definition, Sources & How to Calculate

Millage rate
Image Source: SavannahChathamCounty

The millage rate is something you may not entirely be aware of, although it has a massive effect on one of your major expenses as a homeowner which is the taxes on the property. Knowing the millage rate for your property can typically help you to calculate how much you’ll have to pay in property taxes.

Whether it’s for your permanent house or a real estate investment, knowing the millage rate and property taxes for any piece of real estate is critical. In this guide, you would not only learn about millage rates but would also learn how to calculate property taxes to be more aware when next a tax levy is on the table.

Millage Rate Explained

The tax rate for determining municipal property taxes is known as a millage rate. It is the amount per $1,000 of the assessed value of a property. Since property tax is different from the rest of the state’s taxes, reducing the tax rate or exempting property from the tax base does not diminish revenue for government services. Instead, these acts shift the tax burden to other property taxpayers, most of whom are in the same community. 

Homeowners pay property taxes, which are set by local governments. The property valuation, which includes both the structure and the land on which it resides, is for calculating these taxes. Individual property millage rates are frequently located on the property deed itself.

When referring to property taxes, some towns use the terms millage rate or mill rate. A mill is a one-thousandth of a dollar or $1 for every $1,000 in property worth. The mathematical sign for millage rate is  %o, as in 1%o, which is one part per thousand, or 0.1 percent. Thus, 30 mills equal $30 for every $1,000 of a property’s value.

As previously stated, the amount of tax a homeowner pays is dependent on the property’s value. Every one to five years, depending on the municipality, an assessor from the local government assesses the property and establishes its value. This number is eventually used to figure out how much your property or millage rate taxes will be.

What Is the Source of the Millage Rate?

Within a municipality, different agencies may have different millage rates, which are considered into a homeowner’s property tax computation. School boards, for example, calculate local school taxes using a millage rate from the total property value within school district limits. These are all added together to determine your final property tax bill.

For example, once your local government passes a budget, specific revenues are removed, leaving a deficit to be raised through property taxes. This sum is divided by the total worth of the town’s property, which is then multiplied by 1,000. This statistic denotes the tax rate, sometimes known as the mill rate.

How to Calculate Millage Rate

A property owner divides the number of mills by 1,000 to calculate the millage or mill rate. Assume a local taxing body levied a mill rate of 20 percent on the assessed value of real property within its jurisdiction. This results in a 2.0 per cent property tax rate before any adjustments or exemptions.

Tax Calculation

The taxable valuation and millage rates are for determining an individual taxpayer’s property tax. You can calculate the taxable value by applying legislative policy to the property’s assessed market value. Local governments’ millage rates are determined by the degree of products and services they supply, as well as their budget. They’re calculated in such a way that local governments can meet their financial obligations.

(Taxable Value x Mills) / 1,000 = Property Taxes Paid

How Property Taxes Work

Property taxes are essential for funding municipal and other local government operations. Although not all states levy income taxes, all states levy property taxes. Property taxes are frequently assessed by more than one government entity, such as a municipality and a county.

To provide the necessary tax revenue to cover expenses in their annual budgets, government entities set millage rates on the total value of property within the entity’s jurisdiction, such as infrastructure, police and emergency services, and public schools. A tax assessor adjusts the taxable value of the property once a year due to this and altering housing prices. Millage rates frequently differ depending on the type of property, such as residential, commercial, or industrial.

Property tax is an ad valorem tax, which means it is based on the value of the property. The assessed tax value of a property is calculated using local real estate data and is usually a percentage of the property’s fair market value, which is determined by multiplying the property’s market value or appraisal value by an assessment ratio set by the local taxing authority. However, the assessed tax value of a property may be higher or lower than its actual market value. A property owner can request a reassessment if he believes his property has been assessed at an unreasonably high value.

Some states have a homestead exemption that exempts a percentage of the market value from property taxes. In a state having a $50,000 homestead exemption, only $150,000 of a $200,000 property is taxable.

Relationship Between Millage Rate and Property Tax

The taxing authorities use the millage rate to calculate the amount of property tax owed. Property owners can figure out their property tax by multiplying their total mills by 1,000. Then multiply that amount by the taxable value of the property.

Because numerous taxing authorities may use the same millage rate, a tax bill may include multiple line items. A homeowner might receive a property tax statement that includes five mills from the county government. On the other hand, fifteen mills from the school district, and ten mills from the city. For every $1,000 in assessed value, this equates to 30 mills or $30 in tax. Assuming the local assessor just valued a $100,000 home, the effective millage rate is as follows:

0.03 millage rate = 30 mills / 1,000

Property tax bill: $0.03 x $100,000 = $3000

As a result of this estimate, the effective property tax rate is 3 percent.

How to Calculate Property Taxes Using Millage Rate

Property owners can use mills to calculate their property tax rate and total property tax amount:

To begin, calculate the total millage rate in your local tax district.

Secondly, calculate the millage by dividing the number of mills by 1,000. (which is also the property tax rate). Finally, calculate the property tax rate by multiplying the assessed taxable value by the estimated rate.

The number of mills will vary depending on the municipality and the amount of taxing bodies (ex: school districts, fire departments, city governance). In order to accurately evaluate the exact cost of buying and owning a home, homeowners should consult their municipality’s mill rate statistics.

Most local governments will have a webpage for the county assessor or auditor that displays property tax information. That way, you may compare all of the millage rates to the assessed value of your home to establish how much property tax you owe. Ultimately, this would assist you in determining how much house you can afford.

Example

Here’s an example of a millage rate and how it can be used to calculate property taxes. Keep in mind that all of the values in this example are fictitious, and you should use the matching values in your own circumstance.

An assessor determined the property’s taxable assessed value to be $250,000

The total amount of mills levied on a piece of property – 5 mills levied by the school district, 15 mills levied by the county government, and 12 mills levied by a variety of other charges

To compute the property tax, multiply the assessed value ($250,000) by the total mills (32 mills) and divide by 1000 since one mill equals one-thousandth of a dollar. This results in a total property tax bill of $8,000.

Conclusion

The mill rate or the millage is an important factor in calculating the amount of property taxes that property owners must pay. Many municipal governments make it rather simple to determine the amount of property taxes payable on a certain property. Even so, understanding the relationship between millage rate and taxes will help you be more aware when next a tax levy is on the table.

FAQ’s On Millage Rate

What is assessed value?

This is the evaluated assessment of a property for computing the applicable tax rates. In making its final decisions, an evaluation analyses sales of similar properties as well as home inspection findings. When it comes to selling a home, the assessed value is the most frequently acknowledgeable dollar amount.

What's the difference between assessed value and market value?

The simple answer is that assessed value is utilised for taxation purposes by local and county governments, whereas market value represents the price of a property that a buyer is likely to pay and a seller is likely to accept.

How do you calculate market value?

To determine market value, multiply the number of outstanding shares by the current market price. For example, if XYZ Company trades at $25 per share and has one million shares in circulation, its market value is $25 million.

What is total market value?

Total Market Value refers to the aggregate value of all Stock in a Stock Ownership Affidavit, which value equals the sum of all such Stock’s Fair Market Value.

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