A mill rate is an important concept for residents of municipalities, towns, and counties, as it has an effect on their property taxes. Property owners in the jurisdiction pay taxes based on the assessed value of their property and the local mill rate. Even though the assessed value of a property might stay the same, mill rates can rise or fall depending on the income needs of the local government.

The board or governing body responsible for setting the mill rate starts by estimating the total cost of expenses. These include but are not limited to services such as public safety, schools and highways, salaries, benefits, and pensions. Once this number is established, they would subtract the expected sum of income from any sources such as grants, fees, and levies. The remaining balance is the amount of money needed to be collected through the mill rate. This number is divided by the assessed value of all the taxable real estate and personal property within the jurisdiction. The resulting number is the mill rate for the jurisdiction.

For example, if the total cost of operation is $20 million and the assessed value of all taxable property is $500 million, the mill rate is 40 mills. This means that each $1,000 of assessed value would be subject to $40 in taxes. If a homeowner’s property was assessed at $200,000, then the property tax amount would be calculated as follows: $200,000 multiplied by 0.04 (mill rate) equals $8,000.

In addition to understanding the concept of how mill rates are set, property owners should also be aware of other factors that affect the taxes due. For instance, the assessment of a property may increase or decrease, the municipality’s mill rate may change, or the taxes may be subject to exemptions. Consideration of these factors is necessary in order to accurately calculate the total amount of taxes owed.

Mill rates can vary from one jurisdiction to another, so it is important for property owners understand what the current mill rate is in their area. Although mill rates are important for property owners, they are also a key factor in a city or state’s ability to fund its services and public safety operations. By knowing their mill rate and where it comes from, homeowners can have a better understanding of why and how they are taxed.