How to Calculate a Mill Rate
A mill rate, also known as a tax rate, is a crucial component in property taxation. It's the rate at which property taxes are levied by a taxing jurisdiction, such as a municipality or school district. The mill rate is expressed in mills, where one mill is equivalent to one-thousandth of a dollar, or $0.001. Essentially, for every $1,000 of assessed property value, you pay a certain amount in taxes based on the mill rate.
Understanding how to calculate a mill rate is beneficial for both local governments that need to fund public services and for property owners who want to understand their tax obligations. The fundamental formula for calculating the mill rate is derived from the total tax revenue needed by the jurisdiction divided by the total assessed value of all taxable property within that jurisdiction.
The Formula
The formula to calculate the mill rate is as follows:
Mill Rate = (Total Taxes Needed / Total Assessed Property Value) * 1000
Where:
- Total Taxes Needed is the total amount of money the taxing jurisdiction requires from property taxes to fund its budget for a given fiscal period. This includes funding for schools, police, fire departments, roads, and other public services.
- Total Assessed Property Value is the sum of the market values of all taxable properties within the jurisdiction, as determined by official assessors.
- The multiplication by 1000 converts the rate into mills.
How to Use the Calculator
To use the calculator below, you will need two key pieces of information:
- Total Taxes Needed: This is the total budget amount that needs to be raised through property taxes by the local government or taxing authority.
- Total Assessed Property Value: This is the aggregate assessed value of all taxable properties within the jurisdiction.
Simply enter these two values into the respective fields, and the calculator will provide you with the mill rate in mills.
Example Calculation
Let's say a town needs to raise $5,000,000 in property taxes for its annual budget. The total assessed value of all taxable properties in the town is $2,000,000,000.
Using the formula:
Mill Rate = ($5,000,000 / $2,000,000,000) * 1000
Mill Rate = 0.0025 * 1000
Mill Rate = 2.5 mills
This means that for every $1,000 of assessed property value, a property owner would owe $2.50 in property taxes to that town.