Property Tax: Mill Rates, Assessed Value, Exemptions, and Appeal Savings
October 29, 2026
Local governments fund schools, roads, and services partly through property taxes. The tax is based on the assessed value of the property multiplied by the tax rate, often quoted in mills. One mill equals $1 of tax per $1,000 of assessed value, or 0.1%. A rate of 45 mills is 4.5% of the assessed value.
Assessed value is often a percentage of market value (the assessment ratio), which varies by jurisdiction. For a home with a market value of $400,000 and an assessment ratio of 50%, the assessed value is $200,000.
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Assessed value $200,000. A homestead exemption of $25,000 reduces the taxable value to $175,000. At 45 mills: 175,000 ÷ 1,000 × 45 = $7,875 per year, or $656.25 a month, which a lender typically collects in escrow with the mortgage payment. Without the exemption, the tax would be $9,000, so the exemption saves $1,125. Rates are often the sum of several levies (county, city, school district, special districts), so check the total on the tax bill.
Effective tax rate = tax ÷ market value = 7,875 ÷ 400,000 = 1.97%, which is how people compare areas. Rates in the US range from about 0.3% to over 2% of market value.
| Step | Calculation | Result |
|---|---|---|
| Market value | $400,000 | |
| Assessed value (50%) | 400,000 x 0.50 | $200,000 |
| Taxable after exemption | 200,000 - 25,000 | $175,000 |
| Annual tax at 45 mills | 175 x 45 | $7,875 |
| Monthly escrow | 7,875 / 12 | $656.25 |
Appealing the Assessment
If the assessor's market value is too high, appeal within the deadline. If you succeed in lowering the market value by 10% to $360,000, the assessed value falls to $180,000 and the taxable value to $155,000. The tax becomes 155 × 45 = $6,975, saving $900 a year. Evidence includes recent comparable sales, an appraisal, photos of defects, and errors in the property record (wrong square footage or bedrooms). Many places allow a free informal review before a formal hearing. Some contingency-fee services take a share of the first-year savings.
Other Considerations
Caps on annual assessment increases (such as 2% or 3% a year in some states) protect long-term owners but can create big jumps when a property is sold. Exemptions may apply for seniors, veterans, and disabled owners. Reassessments after improvements can raise the tax. Budget for the tax when comparing homes: a $5,000 difference in annual tax equals about $66,000 of mortgage principal at a 6.5% rate.
Using the Numbers
Request the tax bill of the property and ask whether the current owner's exemptions will transfer; a new buyer may not get them. Rates change with budgets and voter-approved levies. This article is general information, as rules differ by state and locality.
Frequently Asked Questions
What is a mill?
$1 of tax per $1,000 of assessed value.
How do I compute the property tax?
Taxable assessed value divided by 1,000 times the mill rate.
What is the effective tax rate?
Annual tax divided by market value.
What can I appeal?
The assessed value, if it is too high compared with similar properties.
Is the tax included in the monthly mortgage payment?
Often through escrow.