Effective rate vs mill rate: how to read a property tax bill

Open almost any property tax bill and you will find a rate that looks alarming, a rate that looks tiny, or a string of numbers that looks like neither. A Texas bill might add up to a combined rate of more than 2%. An Ohio bill might talk about 80 mills. A California bill might show 1.1%. None of these tell you, on their own, how heavily your home is taxed. For that you need the effective rate.

What a mill rate is

A mill is one-tenth of a cent, so one mill means $1 of tax for every $1,000 of assessed value. A rate of 25 mills is the same as 2.5%. Many states in the Northeast and Midwest still quote rates in mills because it makes the arithmetic easy for the people setting budgets: a school board that needs another $2 million on a tax base of $1 billion of assessed value adds 2 mills.

Some states quote the same idea per $100 instead of per $1,000. Texas and Virginia rates are usually written that way, so a rate of 0.45 means 45 cents for every $100 of value.

Why the rate on the bill is not the whole story

The nominal rate is applied to your assessed or taxable value, and that number is often far from what your home would sell for. In some states the assessed value is a fixed fraction of market value. In others, yearly increases are capped, so a long-time owner’s taxable value can sit well below the market. Then come exemptions: homestead exemptions for the home you live in, extra relief for seniors, veterans and people with disabilities, and freezes that lock the tax at an earlier level.

So two neighbors with identical houses and the same rate on their bills can pay very different amounts. One bought last year and has no cap working in their favor. The other has lived there for twenty years and claims a senior exemption.

The effective rate

The effective rate cuts through all of that. It is simply the tax you paid in a year divided by the market value of the home.

If your bill was $6,000 and your home would sell for about $400,000, your effective rate is 6,000 ÷ 400,000 = 1.5%.

This is the number that lets you compare one county with another, or your own home with your county’s typical owner. Across the United States, the typical effective rate is about 0.94%. The county pages on this site show the typical effective rate for every county, worked out from what owners there actually report paying.

A worked example

Say your county bill lists these rates per $100 of taxable value: county 0.31, city 0.52, school district 0.95 and a hospital district 0.10. Together that is 1.88 per $100, or 1.88%.

Your home is appraised at $380,000, and a homestead exemption takes $100,000 off the school portion only. The school tax is charged on $280,000, and everything else on $380,000:

• School: $280,000 × 0.95% = $2,660
• County, city and hospital: $380,000 × 0.93% = $3,534
• Total: $6,194

On a home worth $380,000, that is an effective rate of about 1.63%, quite a bit lower than the 1.88% printed on the bill.

Which rate should I use?

Use the rates on your bill when you want to check that the bill is right, or when you want to see which taxing body takes the biggest share. Use the effective rate when you are comparing places, budgeting for a move, or asking whether your home is taxed more heavily than your neighbors’.

Common questions

How do I convert mills to a percentage? Divide by 10. Thirty mills is 3%.

Is a higher assessed value always bad? Not on its own. If the whole area’s values rise and the taxing bodies lower their rates to collect the same budget, your bill may barely change. What matters is your share of the total.

Why does my effective rate differ from my county’s typical rate? Exemptions, caps, how long you have owned the home, and which city and school district you live in all move your number away from the county figure.