Simply stated, a Mill Rate is the adjustable measure that calculates how much the tax man collects from you on an annual basis. The concept itself is easily understood.
However, more insight is necessary to identify and understand the underlying, and often unforeseen market forces that can drive YOUR Mill Rate up or down, saving or costing you more money in taxes, depending upon where you choose to buy a home.
Note that each town imposes a different mill rate depending upon that town's grand list and how much revenue they must generate to cover their yearly costs.
“A mill rate is equal to $1 in taxes for every $1,000 in assessed value. To calculate your tax based on your mill rate, divide your assessed value by 1,000 and multiply the result by your mill rate. Municipalities apply property taxes in terms of mill rates.” (Smartasset.com)
For example, a property with an assessed value of $300,000 located in a municipality with a mill rate of 30 mills would have a property tax bill of $9,000 per year.
$300,000/1000 = $300 X 30 = $9,000
The textbook definition of a Mill Rate focuses primarily on the current market value of your home. In appreciating real estate market cycles, when home values increase, your tax bill often follows suit. Obviously this means your taxes can increase even when the mill rate remains unchanged. It also implies that the amount of taxes you pay is affected only by your home's value. At the same time, your town’s mill rate may be increased even while the assessed amount of your home’s value for tax purposes is in decline. Many times it overlooks exterior market forces and conditions that influence whether your town's Mill Rate, and in turn, your taxes, may be increased or decreased.
For example: Towns with a large commercial tax base in the form of occupied Shopping Malls, Restaurants, Retail, Office & Industrial Space will typically generate a lower Mill Rate that results in a more affordable tax bill for YOU.
By the same token, if you reside in a town that has not created a larger pool of commercial tax revenue, this shortfall may be passed on to you the local homeowner, resulting in higher taxes you are required to pay.
**The exception to this rule would be rural and sparsely populated towns that do not offer services in the form of public water, sewer and trash removal. Despite limited commercial tax base, mill rates in these zip codes often remain relatively low.**
As you can see, the amount of taxes you pay hinges upon far more than just the value of your property.
The good news: You can educate yourself on this topic, make educated decisions, and put more money back in your own pocket.
Mill Rates, among other variables, should be one of the deciding factors that determine where you choose to buy a home.
With this as only one example; are you aware of how many more ways there are to save yourself even more money?
Imagine where and how you could re-invest the savings....
For a complete list of 2021 mill rates, including additional taxes for special districts, click here.
Posted by Tim Bray on
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