How Property Taxes are Determined

Many property owners believe that the Assessment Office establishes the taxes on a property. This is not true; the Assessment Office establishes the Fair Market Value of the property only. The taxing authority (county, municipality or school district) establishes the taxes. Real estate taxes are established by the various taxing authorities. The taxing authority takes the total of ALL taxable real estate value in the authority’s district and divides this amount into the budget requirements for revenue for the district. This simple mathematical calculation results in the tax millage rate.

As property owners and taxpayers consider the tax rates set by the taxing authorities, they should give close attention to tax rates or “millage” changes of those taxing authorities. The millage or tax rates are set by the various taxing authorities within whose jurisdiction the property is located.

For example, if the Assessment Office determines the total of all taxable property in a certain school district to be $120,000,000, and the school district requires $5,000,000 in revenue from property taxes, the school district would make the following calculation: $5,000,000 (revenue needed) divided by $120,000,000 (total taxable property in the district) = .04167.

Therefore, the property rate for that school district will need to be 41.67 mills to receive the needed $5,000,000 in revenue. A person owning a property assessed at $50,000 will pay $2,083.50 in property taxes (.04167 X $50,000).

If, in the above example, the school district increases the budget to $7,500,000 needed in revenue from property taxes, then the following mathematical calculation produces the tax rate: $7,500,000 divided by $120,000,000 = .0625, or 62.5 mills.

The owner of the $50,000 assessed property will pay $3,125 in taxes (.0625 X $50,000). Property taxes increased by $1,041.50, even though the assessed value remained the same.

Millage Rates