What Is a Mill Levy?
Let me explain the mill levy to you directly: it's the tax rate expressed in mills that gets applied to your property's assessed value. This rate means one mill is equal to one dollar for every $1,000 of that assessed value. I want you to understand that we calculate the mill levy by figuring out how much revenue each tax jurisdiction needs for the next year to cover public services like schools, infrastructure, and parks. Then, we divide that revenue by the total value of all properties in the area, and the rates from different jurisdictions add up to the overall mill levy for the region.
Key Takeaways
Here's what you need to know right away: the mill levy is a property tax based on your property's assessed value. The tax rate is in mills, where one mill means one dollar per $1,000 of assessed value. Local governments and jurisdictions use this tax to raise money for their budgets and to fund public services such as schools.
How Mill Levies Work
You should know that a mill levy is usually set by local governments and various taxing authorities, including school districts, county governments, and cities. Each one determines its mill rate based on the revenue it needs for the coming year. Most jurisdictions apply a percentage formula called an assessment ratio to figure out the property value for the mill levy. Each year, a tax assessor typically sets the official assessed value of your property, which is used for the mill levy. In some situations, they might use a percentage of the market value instead. To set the mill levy, jurisdictions use this assessment ratio to determine the taxable property value.
Important Note
Keep in mind that a tax assessor usually establishes the assessed value of a property for mill levy purposes, though sometimes a percentage of the market value is used to set it.
Example of a Mill Levy
Let me walk you through an example so you can see how this works. Suppose the total property value in an area is $1 billion, and the school district needs $100 million in revenue, the county needs $10 million, and the city needs $50 million. For the school district, the tax levy is $100 million divided by $1 billion, which is 0.10. The county's is 0.01 ($10 million divided by $1 billion), and the city's is 0.05 ($50 million divided by $1 billion). When you add them up, you get a total mill levy of 0.16, or 160 mills, since one mill equals 0.001. Generally, mill levies apply to real estate, land, buildings, and significant personal property like cars and boats.
How Is the Mill Levy Calculated?
To calculate the mill levy, you divide the total revenue needed by the total value of all taxable properties in the area. The tax rates from each jurisdiction, such as school districts and county governments, are then combined to form the total mill levy.
Are Mill Levies Applied to Personal Property?
Yes, mill levies can apply to personal property like vehicles, boats, and other significant assets, along with real estate such as land and buildings.
How Often Is the Mill Levy Rate Adjusted?
The mill levy rate can be adjusted annually or as required, based on the budget needs of local jurisdictions. If a jurisdiction requires more revenue for expenses, it might increase the rate, but changes usually go through public hearings or approval by the local governing body.
The Bottom Line
In summary, the mill levy is a key element of property taxation that decides how much you as a property owner pay for local services like schools, infrastructure, and government operations. By grasping how the mill levy functions and how it's calculated, you can better predict your tax obligations and see the effects of tax rates from different jurisdictions. If you're uncertain about your mill levy or property tax, I recommend consulting a local tax advisor or government office.
Other articles for you
Financial intermediaries act as middlemen in financial transactions, enhancing market efficiency and providing benefits like safety and liquidity.
Operating cash flow measures the cash generated from a company's core operations, indicating its financial health and sustainability.
Procyclic describes economic elements that move in sync with the economy's cycles, growing during booms and declining during busts.
The industrial goods sector encompasses companies producing capital goods like machinery and equipment for manufacturing and construction, influenced by economic cycles.
A financial plan outlines your current finances, goals, and strategies for achieving them through saving, investing, and managing risks.
A personal financial statement outlines an individual's assets and liabilities to determine net worth and track financial health.
Progress billings are incremental invoices used by contractors to request payments for completed portions of long-term projects.
A forensic audit is a specialized examination of financial records to uncover fraud or misconduct for legal use.
This text explains financial statement analysis techniques for evaluating a company's balance sheet, income statement, and cash flow statement to assess performance and value.
Broad money is the most inclusive measure of an economy's money supply, including cash and easily convertible assets, used by central banks to forecast inflation and guide policy.