Understanding Mill Rates, Tax Levies, and How They Affect You

Understanding Mill Rates, Tax Levies, and How They Affect You gives you a clear, step-by-step way to understand what drives your bill, what to verify on your notice, and what to do if the numbers look off.

Property taxes often feel complicated because multiple terms and government units are involved. Two core concepts – the mill rate and the tax levy – determine what you ultimately pay each year. Understanding them will clarify why your tax bill is what it is, and how budget changes impact your costs.

• Mill Rate (Millage Rate): This is essentially the tax rate. A mill is one one-thousandth of your

property’s assessed value. If the mill rate is 10 (or 0.010), you pay $10 in tax for every $1,000 of value. Investopedia explains that “property taxes are computed by multiplying the assessed value of a property by the mill rate and dividing by 1,000” 20. For example, if your home has an assessed value of $200,000 and the total mill rate (sum of all taxing entities) is 15 mills, your tax due is (15 × 200,000) ÷ 1,000 = $3,000. 3 Each year, your local governments (city, county, school district, etc.) set their own mill rates during the budget process. These are added together for your total tax rate. Mill rates vary widely – high-tax states

like New Jersey or Illinois have effective rates above 2% of home value, while low-tax states like Alabama or Hawaii are well under 0.5% 24. Even within a state, mill rates change based on local needs and budgets.

• Tax Levy: This is the total amount of money that the government needs to raise from property

taxes that year. In other words, the levy is the dollar sum local authorities require to fund services like schools, police, fire, infrastructure, and other budget items. The New York State Tax Guide puts it simply: “Local governments determine tax rates by dividing the total amount of money that has to be raised from the property tax (the tax levy) by the taxable assessed value of real property”. For example, if Town A needs $2,000,000 (its levy) and the total taxable property value in Town A is $40,000,000, then the rate would be calculated as ($2,000,000 ÷ $40,000,000) × $1,000 = $50 per $1,000 of value. Essentially, the levy determines the mill rate needed to cover the budget. If Town A’s levy had to

increase to $2.2 million (due to higher costs), the mill rate would rise proportionally to meet that funding need. Putting these together: Your tax bill = (Assessed Value ÷ 1,000) × (Combined Mill Rate). If either your assessment or your local levy changes, your bill changes. Even if mill rates stay the same, a growing levy (e.g., higher city spending) means the mill rate might creep up next year. Why These Matter to You

• Budget Changes: If your town passes a higher budget (say, to fund a new school or raise teacher

salaries), the levy climbs. All else equal, the mill rate will increase next tax year. Conversely, if alternate revenue (grants, state funding) covers more, the levy could shrink, lowering your rate.

• Assessment Value Fluctuations: After budget is set, the total taxable value of all properties comes

into play. If property values in your jurisdiction grow quickly, a given levy can be spread over a bigger base, potentially lowering the mill rate. But if values drop or only stay flat while the levy grows, residents feel a double pain (higher rate on similar values).

• Different Property Types: Often, commercial properties are assessed differently (sometimes at

higher percentages) than homes. So two neighbors – one homeowner, one a business – may face different tax burdens even under the same mill rate. Knowing your local mill rate and levy helps you anticipate your taxes. Local tax collector or assessor websites often publish the current year’s budget and levy information. Tools like ProptaxHelper’s Tax Rate Calculator let you plug in values to see how much your home’s taxes will be under different mill rates. Understanding these terms also guides appeals. If you notice that your tax bill jumped even without a rate change, it might be due to an assessment bump. Conversely, if your assessed value stayed flat but taxes

rose, likely the levy increased. Example Table: (Assume City B has a $1,000,000 levy and $100,000,000 total assessed base.) 4 Scenario Total Levy Total Assessed Calculated Mill Value (city-wide) Rate (per $1,000) Your Home Assessed Value Your Tax Bill Baseline $1,000,000 $100,000,000 10 mills $250,000 $2,500 Higher Budget (+10%) Home Value Increase (+20%) Home Value Decrease (– 10%) $1,100,000 $100,000,000 11 mills $250,000 $2,750 $1,000,000 $120,000,000 8.33 mills $300,000 $2,500 $1,000,000 $90,000,000 11.11 mills $225,000 $2,500 This illustrates how levy and values interplay to determine your tax.

Quick Tips

• Check your tax bill or assessment notice for the current mill rate and levy figures. Many states/masses list

the breakdown.

• Remember, tax bills often use taxable value, which can be a percentage of market value (e.g., 50% in NJ,

100% in PA). The mill rate multiplies the taxable value. - If local officials vote for bigger spending (new parks, debt service, pensions), expect your levy – and likely your taxes – to grow next year. In summary, mill rates and tax levies are how local governments translate budgets into taxes. Every dollar added to a budget (the levy) or every upward tweak in your home’s assessed value can multiply into a bigger tax bill. Staying informed on these can help you budget your own finances and catch errors. And if your mill rate or levy seems unreasonably high compared to services, that’s something to question at public meetings – your voice can influence future budgets.

Next steps

• Use the Property Tax Estimator to sanity-check your bill.
• If something looks off, run a quick Appeal Savings scenario.
• Scan the Articles list for related topics like exemptions, deadlines, and escrow planning.