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What is a Millage Rate?

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  • Written By: John Lister
  • Edited By: Bronwyn Harris
  • Last Modified Date: 29 August 2016
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A millage rate is a way of expressing the property tax rate in a particular area. It refers to the amount which must be paid per thousand dollars of the property's value. Of course, a millage rate can work in the same way for any currency unit, not just dollars.

The millage rate works along the lines of a percentage rate. The difference is that millage works by breaking the sum down into thousandths, while percentage breaks it down by hundredths. Millage takes its name from mill, which stems from the Latin word for a thousandth; the equivalent term to "percent" is permille. Millage is used in property tax assessments, since it usually makes for an easier calculation that using percentages. This is because of the general size of figures which are encountered when dealing with house prices.

The way the millage rate is used is relatively simple. For example, in a local area the millage rate may be $12 US Dollars (USD) permille. This means that the homeowner must pay $12 USD for every thousand dollars in the taxable value of their property. If that taxable value is $50,000 USD, then the tax due is $12 USD multiplied by 50, totaling $600 USD. The rate can be informally referred to using "mill": in this example it would be described as a property tax rate of "12 mill."

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A property tax calculated using a millage rate is classed as an ad valorem tax. This means it is based on a value, in this case of real estate, rather than on a quantity. If property tax was based on a flat fee per home regardless of its value, it would be known as a specific duty.

The phrase ad valorem can also be used less formally to refer to the taxable value of a home. This is a figure produced by a tax assessor who, despite the name, assesses property values rather than the tax itself. How the value is assessed can vary from location to location. It will not necessarily match the current market value of the property or have any direct connection with the actual purchase price from the last time the home was sold. Generally, though, it will be in the same region as these figures.

In most cases, the assessment will cover both the value of the land itself and the value of the buildings. The latter value is sometimes referred to as the improvement value, the idea being that the land itself has not changed but the addition of the building has improved the overall property's worth. In some areas there may also be some account taken of other personal property owned by the property owner such as particularly valuable vehicles.

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