March 05, 2021

How is Tax Rate determined to calculate property taxes?

Are you a real property owner? Are you guilty of paying your taxes year after year without understanding why you pay as much as you do? Don't worry. This article will teach you everything you need to understand about tax rates and other variables needed to calculate your property tax bill.

Property owners are commonly levied with property taxes by more than one government entity, such as a municipality and a county. Property taxes for your real property are determined based on two things - the assessed value of your property and the tax rate of the taxing jurisdiction. Property taxes are calculated by multiplying the assessed, taxable property value by the total tax rate (mill rate) and dividing the sum by 1,000.

Property tax = (mill rate x taxable property value) ÷ 1,000

What is assessed value?

The assessed value is a yearly estimation of your property's worth. Government-appointed property assessors decide the assessed value for each home within a given tax district.

What is tax rate?

A tax rate is a percentage at which a tax is levied on an individual or a corporation. Taxing jurisdictions, including cities, counties and school districts set their tax rates, which amount to the percentage of a property’s value that a property owner must pay to the jurisdiction.

How is the tax rate determined?

The tax rate is determined by the combined assessed value of the properties in the area. Tax rates for each jurisdiction are calculated separately. Once determined, all the levies are added together to determine the total tax rate – or a mill rate – for an entire region.

What is the mill rate?

The mill rate is the amount of tax payable per dollar of the assessed value of a property. A 'mill' represents the amount per $1,000 of the assessed value of the property used to calculate the amount of property tax. Government entities set mill rates based on the total value of properties within their jurisdiction, to provide the necessary tax revenue to cover projected expenses in their annual budgets. Expenses include infrastructure and services such as roads, schools, emergency services, public safety services, health care and so on.
Mill rates for individual properties are usually found on the property deed itself. Mill rates are often expressed mathematically with the symbol %o, as in 1%o, which is one part per thousand, or 0.1%.

How is the mill rate determined?

Once the local government passes a budget, known revenues are subtracted, leaving a deficit to be raised through property taxes. This amount is divided by the value of all properties within the jurisdiction and then multiplied by 1,000. This figure is the mill rate. Government entities set the mill rate annually because of fluctuating real estate values and the need to cover infrastructure and service provision costs as listed above. Mill rates frequently vary for different types of property, such as residential, commercial, or industrial properties.

Determining the property tax using the assessed value and property tax rate (mill rate)

Consider a home with a market value of $200,000 In the area, let us consider the tax-assessed value equals 20% of the market value This means that the property tax has a basis of $100,000 If the mill rate for the property is 70 mills, which means for every $1,000 assessed value, $70 in property taxes is due, this is how property tax is calculated: $100,000 x 7% = $2,800

The tax rate for the current year can usually be found on your county's website or can be known by contacting a county or city official in the department of finance and taxation.

Is your property tax bill too high year after year? Here are some tips to lower your tax bill.

Unsatisfied with your property’s assessed value. Learn everything you need to know to appeal your tax bill here.

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Articles presented here are for general information and education only. It is provided as a courtesy to the general public. SQD Taxtech LLC does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of SQD Taxtech LLC. Please cite source when quoting.

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