How to Calculate Property Tax Using Mill Rate
Property tax in the United States is based on a property’s value. Property tax calculations vary in different parts of the country, but typically follow a general format. Your local government assesses your property’s value annually or at some other interval and uses a tax rate called a mill rate to figure your annual property tax.
One mill by definition equals 1/1,000 of $1, or $1 of tax for every $1,000 of value. A property is typically subject to different mill rates from more than one jurisdiction, such as the county, state or local school district.
Calculating Tax From Mill Rate
Property taxes are based on a property's property’s total assessed value, including the land and improvements, or buildings. You can find the assessed value on your most recent assessment notice, on your most recent property tax bill or by contacting the assessor’s office of the county or city in which your property is located. In many places, you can get property tax information online.
Your property’s assessed value might be the same as its market value, or it might be a percentage of its market value, depending on your local jurisdiction. For example, if your home is worth $850,000, its assessed value might be 50 percent of that, or $425,000.
Then, subtract the amount of any exemptions for which you qualify from the assessed value to determine the property’s taxable value. An example of an exemption is a homestead exemption, which removes part of your primary residence’s value from taxation. You might have to apply to your local jurisdiction to qualify for such exemptions. For example, if your home’s assessed value is $425,000 and you qualify for a $7,000 homestead exemption, subtract $7,000 from $425,000 to get a $418,000 taxable value. Some jurisdictions offer additional exemptions for senior citizens, veterans or other groups.
You'll also need to find the various mill rates at which your property is taxed. You can find these on your bill or by contacting the assessor’s office. In this example, assume your property is subject to rates of 10 mills by the county and 5 mills by the city. In some cases, there may be additional taxing authorities, including school districts, fire districts and the likes.
Remember, you define a mill as 1/1000 of $1. So to convert millage rates to dollar rate amounts, divide each mill rate by 1,000. Continuing with the example, divide 10 mills by 1,000 to get 0.01. Divide 5 mills by 1,000 to get 0.005.
Then, multiply each result by your property’s taxable value. In this example, multiply 0.01 by $418,000 to get $4,180 in county property tax. Multiply 0.005 by $418,000 to get $2,090 in city property tax. Add together your results to determine your total annual property tax. Concluding the example, add $4,180 to $2,090 to get $6,270 in total annual property tax. A 1/2 mill property tax levy would be $0.50 per $1,000.
Understanding Special Assessments
Your property tax bill might include additional charges called special assessments. These are fees for benefits your property receives, such as paved streets. Special assessments do not depend on mill rates or your property’s value. Not all jurisdictions have such assessments. Check with your local tax assessor or see your tax bill to see if these apply to you.
2018 Tax Law Changes
Property taxes are a state and local matter, not a federal one, so they're not affected directly by the 2018 tax law changes.
One thing that is changing is a new limit on how much in state and local taxes you can deduct from your federal income tax. These are limited to $10,000 as of 2018, after previously being unlimited. This will cause some people, particularly owners of valuable property and people who live in high-tax states, to owe more federal tax.
The 2017 Tax Law
For 2017 and earlier years, the deduction for state and local tax is unlimited.
- Your property tax bill might include additional charges called special assessments. These are fees for benefits your property receives, such as paved streets. Special assessments do not depend on mill rates or your property’s value.