{"id":25926,"date":"2021-07-29T13:47:12","date_gmt":"2021-07-29T20:47:12","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=25926"},"modified":"2024-05-29T12:29:56","modified_gmt":"2024-05-29T19:29:56","slug":"what-is-mill-rate","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/what-is-mill-rate\/","title":{"rendered":"What is Mill Rate: Minding the Math Behind Your Property Taxes"},"content":{"rendered":"

Your property tax bill just arrived, and after scanning the tax assessments you come across a term you\u2019re unfamiliar with \u2014 mill rate.<\/p>\n

The mill rate, sometimes referred to as mill levy or millage, is a method tax districts often use to express a locality\u2019s property tax rate. The mill rate impacts a homeowner\u2019s property tax bill as one of the variables in the equation used to calculate a property tax bill.<\/p>\n

We asked property tax assessor Ken Brownlee<\/a> of Mesa County, Colorado, to help us demystify mill rates and explain how this key variable plays a role in calculating property tax payments. \u201cIt\u2019s actually quite simple,\u201d Brownlee assures us. \u201cBut one has to understand that there are moving parts to the equation.\u201d<\/p>\n

\"Explain<\/a>
Source: (nednapa \/ ShutterStock)<\/figcaption><\/figure>\n

What is a mill rate?<\/h2>\n

The term mill derives from the Latin mille<\/i>, which translates into thousand<\/a>. In the context of property taxes, one mill rate equates to a $1 tax levy for every $1,000 of a home\u2019s assessed value<\/a>. For example, a home assessed at $300,000 with a mill rate of 3 would be taxed $3 for every thousand dollars of the home\u2019s value. The homeowner\u2019s tax liability would be $900 \u2014 $3 multiplied by 300.<\/p>\n

Who sets the mill rate?<\/h3>\n

The taxing authority, on behalf of the state and local government where a property is located, sets the mill rate for a home.<\/p>\n

How is mill rate determined?<\/h3>\n

Public services such as schools, roads, libraries, and fire departments rely on property tax revenue to operate. Tax levies distribute the financial obligation of operating these public services among property owners within specific taxing districts.<\/p>\n

When establishing a mill rate, a tax district first determines how much revenue they need to operate<\/a>. Then the tax district calculates which portion of its budget will come from property tax revenue and divides the required property tax revenue by the total taxable value for real property within its jurisdiction.<\/p>\n

Mill rates are usually an aggregate of different tax rates based on where your home is located<\/a>.<\/p>\n

Brownlee explains:<\/p>\n

\u201cEach taxing district, school district, city, fire, etcetera, could levy their own mill, and the total tax would be the sum of the various districts that apply to a specific property.”<\/p><\/blockquote>\n

Calculating your total property tax payment<\/h2>\n

Are you curious about how the mill rate affects your tax bill? Here\u2019s how to factor in the mill levy and estimate how much property tax you\u2019ll owe.<\/p>\n

1. Determine your property\u2019s assessed value<\/h3>\n

Reach out to your local assessor\u2019s office, which sets taxable property values, to determine the assessed value the taxing agency has assigned to your home<\/a>. According to a report by the National Conference of State Legislatures (NCSL), time frames between reassessments vary depending on state law. For example, in Nevada, reassessments can occur every one to ten years<\/a>.<\/p>\n

2. Ask about your state\u2019s assessment rate<\/h3>\n

Not all jurisdictions tax 100% of a home\u2019s value when calculating property tax payments. Each state mandates an assessment rate or the percentage of value used to determine the taxable portion of your property\u2019s assessed value.<\/p>\n

In Colorado, Brownlee notes that residential homes have an assessment rate of 7.15%. A $100,000 home, for example, would be taxed based on $7,150 of its value. Other states, such as Washington, have an assessment rate of 100%<\/a>. A home valued at $100,000 would be taxed at its full market value.<\/p>\n

The NCSL report also reasons \u201cthese [assessment] ratios are applied because they allow some flexibility with tax policy and provide a way to levy more or less tax on different types of property without using different tax rates.\u201d For example, non-residential properties in Colorado are taxed at a 29% assessed ratio, more than four times the percentage of residential homes.<\/p>\n

Contact your local assessor\u2019s office or state revenue department to attain the assessment rate for your state.<\/p>\n

3. Multiply your property\u2019s market value by your state\u2019s assessment rate and the mill levy<\/h3>\n

When making your property tax calculation, Brownlee advises us to convert the mill rate into decimal format. To do so, divide the mill rate by 1,000. For example, a mill rate of 8 converts to 0.008.<\/p>\n

Then multiply your home\u2019s assessed value (from step one) by your state\u2019s assessment rate and the local mill levy. For example, if a home has a $500,000 value and is located in a state with a 7.15% assessment ratio and a mill levy of 8, you would multiply $500,000 by 7.15% by 0.008 (500,000 x 0.0715 x 0.008). The property tax for this home would be $286.<\/p>\n

4. Add other local fees collected on your property tax bill<\/h3>\n

Additional fees that aren\u2019t included in the mill levy may apply to your property tax bill. Brownlee says you\u2019ll want to contact the local property tax office or taxing authority to inquire about other charges that may apply to your home.<\/p>\n

For instance, in Brownlee\u2019s Mesa County, homes in certain parts of the county are assessed an irrigation fee. And in King County, Washington, homeowners may be subject to a per-parcel surface water management fee<\/a>.<\/p>\n

5. Adjust your calculation based on qualifying property tax exemptions or credits<\/h3>\n

Individual states and jurisdictions offer property tax breaks in the form of exemptions or credits, which can reduce the tax liability for some homeowners. Contact your local taxing authority to inquire about available exemptions or credits in your area. Examples of property tax exemptions include:<\/p>\n