A mill rate, often referred to as a millage rate, is used to calculate property taxes by multiplying it by the value of a property. A mill is one one-thousandth of a dollar, and in property taxes, 1 mill equals $1 per each $1,000, and 1 mill also equals 0.1%.
All states and Washington, D.C. impose property taxes but not always at the state level. Many do so at the municipal or county level. The federal government also doesn't have a standard property tax.
Learn more about the mill rate and what it means for your property taxes.
Definition and Examples of a Mill Rate
A mill equals $1 per each $1,000 of a property's assessed value, which translates to one one-thousandth of a dollar. It also equals 0.1% and is used to calculate property taxes.
- Alternate name: Millage rate
Property taxation depends jointly on this rate in combination with the assessed value of your home. The assessed value can be as much as equal to the market value, though it could also be lower. It's determined by assessors who are either appointed or employed by the government that's collecting the tax. The government sets the rate, and it can change annually, but typically the city council must approve it.
Assessed value doesn't begin and end with the structure. Assessors will also include the value of the land a home or property sits upon.
For example, a mill rate of 10 would mean $10 of tax assessed against each $1,000 of a property's value. As a percentage, it would be 1%. If this was your government's mill rate on a home assessed for $245,000, your tax would equal $2,450:
($245,000 / $1,000) x 10 = $2,450
A mill rate of 10 may be on the conservative side. For example, the mill rate is 74.29 in Hartford, Connecticut, as of June 2021, while the mill rate is 27.68 in Milford, Connecticut.
How a Mill Rate Works
Mill rates are determined by a municipality's or district's financial needs. Property taxes effectively keep them up and running, paying for a significant portion of their ongoing expenses of operation. Mill rates increase as expenses rise.
Portland, Maine, determines its mill rates by gauging how much revenue the city needs, then dividing this number by the total local assessed values of properties located within its borders.
Types of Mill Rates
Some jurisdictions break down their mill rates into categories, designating the money raised by these taxes to certain needs. For example, emergency services might get 5 out of 10 mills, the school system might get 2 mills, and municipal government operations might get the remaining 3 mills. A property owner's mill rate of 10 would cover each of these mill rates.
Different districts within the same city might have different mill rates, too, depending on their financial needs and whether a school is located in that particular area.
States that impose property taxes often regulate assessed values. For example, South Carolina's Constitution provides for eight assessment rates—percentages of market value—depending on what a property is used for. For example, manufacturing property has a 10.5% assessment rate, while residential real estate is at 4%. A mill applies to these rates, so the overall result can vary for different properties.
Criticism of Mill Rates
Municipalities, districts, and counties need funding—there's no getting around that. The Municipal Association of South Carolina indicates that property taxes support about 26% of a city's revenue. The Tax Policy Center indicates that property tax dollars contribute the most revenue to districts, counties, and municipalities. Some areas, such as in South Carolina, implement steps and policies to ensure that mill rates don't create an unsustainable burden for property owners. However, these rates can be hard to predict from one year to the next, thanks to the effect of the economy.
Rising costs mean greater financial needs for the taxing authority. If they so choose, local governments can pump up mill rates to meet the challenge, but this adds tax burdens to citizens who may already be financially struggling during tough economic times.
Another issue is the assessed value of a property to which the mill rate is applied. Not all taxing authorities consider the income that a property might generate to alleviate the burden on private homeowners as South Carolina does. And some jurisdictions perform assessments every year, raising the potential for increased property taxes on an annual basis.
On the bright side, many states step in to regulate these calculations and procedures, and many jurisdictions provide breaks to certain property owners. These might come in the form of "circuit breaker" programs or homestead deductions and exemptions.
Circuit breaker programs prevent property taxes from exceeding a certain percentage of income for senior and low-income homeowners. Exemptions and deductions might apply for owners who actually live in their properties.
- A mill rate is used to calculate property taxes, and 1 mill equals $1 per each $1,000 of a property's assessed value.
- Some taxing districts also regulate how much of a property's market value can be used as its assessed value.
- Property tax revenue raised by mill rates pays for a taxing jurisdiction's costs of operation, such as funding schools and emergency services.
- The property tax equation has been criticized for placing an unfair burden on some taxpayers, expecting them to foot a substantial part of the bill for a jurisdiction's costs.