Work Out Your Own Property Tax Bill With Mill Rates and Exemptions

Your property tax bill arrives once or twice a year, printed on paper the color of a hospital gown, in a font designed to discourage reading. It contains a handful of numbers, a few abbreviations nobody explains, and a total that you are expected to pay without asking questions. Most families do exactly that. Many of them pay a mortgage company that pays the bill for them, and they never see it at all.

That is a mistake, because a property tax bill is one of the few tax bills in America that you can check, line by line, with a calculator and an afternoon. It is not a mystery. It is a short multiplication problem with a few subtractions. And in most places, if one of the inputs is wrong, you have a right to say so.

This worksheet gives you the calculation, a fully worked example with exact arithmetic, and the appeal steps. The house in the example is a hypothetical house in a hypothetical county, with invented numbers. Your state will use different terms and different limits, so the last step is always the same: confirm the rules on your county assessor's website.

The formula in one line

Here it is:

Tax = (market value × assessment ratio − exemptions) ÷ 1,000 × mill rate

Read it from left to right.

• Market value is what the assessor thinks your property would sell for.
• Assessment ratio is the share of market value that is taxable. Some places assess at 100 percent of market value. Others assess at a fraction, such as 50 percent, which is why you should never compare the assessed value on your bill to a real estate listing without checking the ratio.
• Exemptions are dollar amounts or percentages the law subtracts before the rate is applied. A homestead exemption for an owner-occupied primary residence is the most common. There are also exemptions for seniors, veterans, and people with disabilities in many places.
• Mill rate is the tax rate. One mill is one dollar of tax for every thousand dollars of taxable value. So 62 mills means $62 of tax for every $1,000 of taxable value, which is the same as 6.2 percent of taxable value.

Some states state the rate per $100 of value, or as a percentage, or by another name. The arithmetic is the same. Convert to mills if you need to: a rate of $6.20 per $100 equals 62 mills, because $6.20 per $100 is $62 per $1,000.

Step by step

Step 1: Find your market value

Look at the assessment notice you receive from the county assessor, or look up your parcel on the assessor's website. You want the number labeled market value, appraised value, or something similar.

Step 2: Find the assessment ratio

The same notice or the assessor's site will show the assessed value, which is market value times the ratio. Divide the assessed value by the market value to get your ratio. If the notice says market value $320,000 and assessed value $160,000, the ratio is 160,000 ÷ 320,000 = 0.50, or 50 percent.

Step 3: List your exemptions

Find the exemptions on the notice or the bill. Ask whether any exemptions you qualify for are missing. Many homestead exemptions are not automatic: the owner has to file an application once, or renew it, and a missed filing means no exemption. This is the most common reason families overpay.

Step 4: Subtract to get taxable value

Taxable value = assessed value − exemptions.

Step 5: Add up the mill rates

Your bill probably lists the rates for several taxing bodies: the county, the school district, the city or township, and sometimes a library, fire or special district. Add them together for the combined rate.

Step 6: Multiply

Tax = taxable value ÷ 1,000 × combined mill rate.

Step 7: Compare to the bill

If your calculation matches the bill, the arithmetic is right. If it does not, find the gap. The usual suspects are an exemption that was not applied, a rate you did not include, or a different assessment ratio.

A fully worked example (hypothetical)

Meet the Marlowe family. They live in a hypothetical house in a hypothetical county. Every number below is invented for this post.

Now the tax, one body at a time. Take taxable value in thousands: 135,000 ÷ 1,000 = 135.

• County: 135 × 18 = $2,430
• School district: 135 × 34 = $4,590
• City: 135 × 10 = $1,350

Add them: 2,430 + 4,590 = 7,020, and 7,020 + 1,350 = $8,370.

Check by multiplying the combined rate directly: 135 × 62 = 135 × 60 + 135 × 2 = 8,100 + 270 = $8,370. The two methods agree.

A few more numbers help make the figure real.

• If the family's lender collects the tax in escrow, the monthly share is 8,370 ÷ 12 = $697.50.
• The effective rate against the market value is 8,370 ÷ 320,000 = 0.02615625, which is about 2.62 percent. That figure is a better way to compare your tax burden with a neighbor in another county than comparing mill rates alone.
• Using the per-$100 form: 62 mills is $6.20 per $100. The taxable value in hundreds is 135,000 ÷ 100 = 1,350, and 1,350 × 6.20 = 8,100 + 270 = $8,370.

What a mistake costs

Here is what happens to the Marlowes' bill if something goes wrong. Each case is hypothetical.

Case A: the homestead exemption was never applied. Taxable value would be the full $160,000, so the tax is 160 × 62 = 9,920 (160 × 60 = 9,600, plus 160 × 2 = 320). The difference from the correct bill is 9,920 − 8,370 = $1,550 a year. Over a decade, that is $15,500 in overpayment, before any growth in rates. Check your exemptions first.

Case B: the market value is too high. Suppose the Marlowes gather evidence that comparable houses nearby sold for about $300,000, and the assessor agrees to a market value of $300,000. Assessed value is 300,000 × 0.50 = $150,000. Taxable value is 150,000 − 25,000 = $125,000. Tax is 125 × 62 = $7,750. The savings are 8,370 − 7,750 = $620 a year, and in many places the lower value carries forward to the following years.

Case C: a rate increase. Suppose the school district raises its rate by 2 mills, from 34 to 36. The extra tax is 135 × 2 = $270. That is the cost of a two-mill increase to a house with this taxable value. You can use the same shortcut for any proposal: multiply the number of mills by your taxable value in thousands.

Where the mill rate comes from

You can check the rate too. A taxing body sets a budget, decides how much it needs to raise from property taxes (the levy), and divides the levy by the total taxable value in its territory. The result is the rate.

Hypothetical example: a school district needs a $34,000,000 levy, and the total taxable value in the district is $1,000,000,000. The rate is 34,000,000 ÷ 1,000,000,000 = 0.034, which is 34 mills.

Now suppose property values in the district rise 10 percent and the school district leaves its levy unchanged. The new total is $1,100,000,000, and the rate is 34,000,000 ÷ 1,100,000,000 = 0.030909, which is about 30.9 mills. The rate falls even though the levy did not change, and a family whose assessment rose by exactly 10 percent pays the same bill as before. A family whose assessment rose less than the district average pays less, and one whose assessment rose more pays more. That is why a higher assessment does not automatically mean a higher bill, and why a higher rate is a decision by an elected body, not a fact of nature.

Many states require a taxing body that wants more money than last year to say so out loud, in a notice or a public hearing. Look up what your state requires, and attend the hearing. We explain how a state's overall tax mix fits together in Sales Tax, Property Tax and Who Really Pays for Your State.

Caps and freezes: why two identical houses pay different bills

Many states limit how fast the assessed value of a home can rise from year to year. California's Proposition 13 and Florida's Save Our Homes amendment are the best-known examples, and other states have their own versions. Where a cap applies, Step 2 changes. The assessed value on your bill is not simply market value times the ratio. It is the capped value, which can be well below what the formula would produce, and it usually resets when the house is sold.

Here is a hypothetical to show what that does. Two identical houses sit side by side, taxed at the same 62 mills, and for simplicity neither has an exemption. The first owner bought twelve years ago, and the cap has held the assessed value to $100,000. The second owner bought last year, and the assessed value reset to $160,000.

• First owner: 100 × 62 = $6,200
• Second owner: 160 × 62 = 160 × 60 + 160 × 2 = 9,600 + 320 = $9,920
• Difference: 9,920 − 6,200 = $3,720 a year, for the same house on the same street.

Is that fair? It is the question at the heart of the honest argument over caps. Supporters say a family should not be taxed out of a home because the neighborhood got popular. Critics say it favors long-time owners over new buyers. If you have just bought a house, do not assume the previous owner's bill is yours. Ask the assessor what your capped or reset value will be, and look for a transfer or portability rule if you are moving within the state.

If your mortgage company pays the bill

Most mortgage lenders collect one-twelfth of the estimated annual property tax and insurance with every payment and hold it in an escrow account. The lender then pays the bill when it is due. This is convenient, and it also hides the number.

Two habits protect you. First, read the annual escrow statement the lender sends. It shows the tax bill the lender actually paid. If it does not match your own calculation, you have a question to ask. Second, remember that a change in the bill changes your monthly payment. If the Marlowes' bill rose by the $270 two-mill increase from Case C, the escrow part of their payment would rise by 270 ÷ 12 = $22.50 a month, after the lender's next analysis. And if you win an appeal, tell the lender in writing and ask for the escrow to be recalculated, because the savings do not appear in your payment until the lender adjusts it. Homestead exemptions often require you to file with the county directly, so do not assume the lender did it for you.

Keep a three-year log

The cheapest tool in this worksheet is a table you build yourself. Each year, when the bill arrives, write down five numbers: assessed value, exemptions, combined mill rate, total tax, and the date of the budget hearings. After three years you can see whether the bill is rising because the assessment is rising, because the rate is rising, or because an exemption disappeared. That tells you where to push: the assessor, the elected bodies that set the rate, or the state legislature that writes the exemption.

How to file an appeal

If you think the value or an exemption is wrong, here is the repeatable procedure.

1. Find the deadline. The window for appealing an assessment is often short, sometimes only a few weeks after the notice. It is printed on the notice. Put it on your calendar the day the notice arrives.
2. Pull the property record card. The assessor's website usually shows the facts the county has on file: square footage, bedrooms, bathrooms, lot size, age, condition, and any additions. Errors here are common and are the easiest to win. A finished basement that does not exist, or a second story you never built, is worth correcting.
3. Gather comparable sales. Find three to five recent sales of similar houses in your neighborhood: similar size, age and condition. The assessor's site or a real estate listing service may show them. A recent professional appraisal helps if you have one.
4. Document problems. If the house has a defect that lowers value, such as foundation damage or a failing roof, take photographs and get a written repair estimate.
5. Ask for an informal review. Many assessors will meet or exchange emails before a formal appeal. Bring your evidence. A courteous, specific request goes further than an angry one.
6. File the formal appeal. If the informal review does not resolve it, file with the board that hears appeals. It may be called a board of review, a board of equalization or a similar name. Use the form the county provides, state the value you believe is correct, and attach your evidence.
7. Attend the hearing. Present your comparables in a few minutes, answer questions, and stay on the numbers.
8. Know the next level. If the board's decision is wrong, many states let you appeal further to a state tax tribunal or to court. Check the time limits.

Two cautions. An appeal can change your value, but it will not change the rate, which is set by the taxing bodies. And ask the assessor's office whether the board in your county has the power to raise a value as well as lower it. In nearly every case the answer is that your evidence is the best protection.

Common errors to check

• A missing exemption. Homestead, senior, veteran and disability exemptions are a common source of overpayment.
• A wrong property description. Wrong square footage, wrong number of bathrooms, wrong lot size.
• A comparable that is not comparable. If the assessor's comparables are larger or newer, say so.
• A mixed-up ratio. If you compare the assessed value to a listing price, you will think you are over-assessed when you are not.
• A missed deadline. The best argument in the world loses if it arrives late.

For the story of what happens when a whole state decides property taxes have gone too far, see Proposition 13 and the Tax Revolt That Rattled Every Statehouse. For the reason housing costs and zoning rules matter to the same bill, see zoning may be the biggest price control you never got to vote on. And if you want to see how a state sets limits on what local governments can raise, read How Colorado Voters Put a Leash on Their Own Legislature.

The bottom line

• Your property tax is taxable value times the mill rate, and you can check every step with a calculator. Do it once, on your own bill, this month.
• The biggest savings usually come from a missing exemption or a wrong fact on the property record. Check those first, because they are the easiest wins.
• Know your appeal deadline the day the notice arrives, and bring comparable sales, not complaints.
• The rate is set by elected bodies in public meetings. Go to the budget hearing. That is where the number on next year's bill is decided.