Friday, February 5, 2021 / by Madyson Woolhouse
You probably already know that property taxes are a huge source of income for local & state governments. But, did you know that they are calculated by taking the mill rate & multiplying it by the assessed value of your property? What's the mill rate? How do they assess the value of your property?? SO. MANY. QUESTIONS.
According to an article found on Investopedia, the mill levy is the tax rate levied on your property value, with one mill representing one-tenth of one cent. So, for $1,000 of assessed property value, one mill would be equal to $1. The article goes on to say that "tax levies for each jurisdiction in an area are calculated separately; then, all the levies are added together to determine the total mill rate for an entire region." An example used is as follows: Suppose the total assessed property value in a county is $100 million & the county needs $1 million in tax revenues to run it's necessary operations. The mill levy would be $1 million divided by $100 million, equalling 1%.
Overall, the assessed value estimates the reasonable market value for your home, based on your local real estate market conditions. The assessor will review all necessary information to arrive at an estimation. This includes looking at comparable properties, replacement costs for the property, maintenance costs, improvements, income being made from the property (if any), & finally, the interest that would be charged to buy or construct a property similar to yours.
There are three methods for conducting this type of research. An assessor can use all three or choose one to estimate the market value.
1. The Sales Evaluation Method
This method is pretty self-explanatory. It uses comparable sales in the area, including location, state of the property, improvements, & market conditions as factors.
2. The Cost Method
With this approach, the assessor determines how much it would cost to replace your property, taking into consideration old vs new properties.
3. The Income Method
This method takes a look at how much you could make from this property if you were to rent it out, including maintenance costs, managing the property, insurance & taxes, along with the ROI you could expect.
Most assessments are done either annually or every 5 years. You can access this information on your county website & sometimes even pay your bill via the internet. It's important to know how your taxes are calculated & when the billing cycle is. Call us if you need more information or have any questions!
Information found on: Investopedia