Mill Levy

Demystifying Mill Levies: Understanding Property Taxation

Understanding Mill Levies

Core Concept

A mill levy represents a property tax imposed based on the assessed value of a property. Expressed in mills, where one mill equals one dollar per $1,000 of assessed value, this tax is instrumental in funding essential public services such as schools and infrastructure maintenance.

Taxation Dynamics

Mill levies are calculated by local governments and other jurisdictions to meet their budgetary requirements for the upcoming fiscal year. This involves determining the necessary revenue to cover public service expenses and then dividing it by the total assessed value of properties within the area.

How Mill Levies Function

Multi-Jurisdictional Taxation

In regions with multiple taxing authorities like school, county, and city districts, each imposes its mill levy, contributing to the overall property tax burden. The rate of taxation, expressed in mills, determines the amount of tax charged based on the property's assessed value.

Assessment Methods

Property values for mill levy assessment are typically determined by tax assessors using either the official assessed value or a percentage of the property's market value. Most jurisdictions utilize an assessment ratio, a percentage formula, to ascertain the property value for taxation purposes.

Illustrative Example

Real-world Scenario

Consider a scenario where the total property value in an area amounts to $1 billion. If the school district requires $100 million in revenue, the county needs $10 million, and the city requires $50 million, each entity's tax levy is calculated based on its revenue requirement divided by the total property value. The sum of these levies yields the overall mill levy for the area.

Property Tax Application

Mill levies are typically applied to various types of real estate, including land, buildings, and significant personal property such as vehicles and watercraft.