# Mill Levy: What It Is, How It Works, and Example

![Silhouette of windmills](https://www.investopedia.com/thmb/t0cN6uOOPFl8lbmxrq5ywIBBgP8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/silhouette-of-windmills-1181195357-d87b25916cdf44ee894c420d927d1685.jpg)

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> **Definition**
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> The mill levy is the tax rate expressed in mills applied to a property's assessed value.

## What Is a Mill Levy?

The mill levy is a property tax applied to the [assessed value](https://www.investopedia.com/terms/a/assessedvalue.asp) of a property. The rate of the tax is expressed in mills and is equal to one dollar per $1,000 dollars of assessed value. The mill [levy](https://www.investopedia.com/terms/l/levy.asp) is calculated by determining how much revenue each tax jurisdiction needs for the upcoming year to fund its public services, such as schools, public infrastructure, and parks. This revenue is then divided by the total value of all property within the area, and the combined rates from various jurisdictions create the mill levy for the entire region.

### Key Takeaways

*   The mill levy is a property tax applied based on the assessed value of the property.
*   The rate of the tax is expressed in mills—one mill is equal to one dollar per $1,000 of assessed value.
*   The tax is applied by local governments and other jurisdictions to raise revenue to cover its budget and to pay for public services such as schools.

## How Mill Levies Work

A mill levy is typically imposed by local governments and various taxing authorities, such as school districts, county governments, and cities. Each authority sets a mill rate based on the amount of revenue it needs for the upcoming year.

> **Important**
>
> Most jurisdictions use a percentage formula, which is known as an assessment ratio, to determine the property value for the mill levy.

Each year, the official assessed value of a property is usually set by a [tax assessor](https://www.investopedia.com/terms/a/assessor.asp) and may be used to set the mill levy. In some cases, a percentage of the market value of the property can be used to set the mill levy instead.

To determine what the mill levy will be, most jurisdictions use a percentage formula, which is known as an assessment ratio, to determine the property value for the mill levy.

> **Fast Fact**
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> A tax assessor usually sets the assessed value of a property for mill levy purposes. In some cases, a percentage of the market value of the property can be used to set the mill levy.

## Example of a Mill Levy

As an example, if the entire property value in the area is $1 billion, and the school district needs $100 million in revenue, the county needs $10 million and the city needs $50 million. The tax levy for the school district would be $100 million divided by $1 billion or 0.10. The tax levy for the county would be 0.01 (10 million/1 billion), and the tax levy for the city would be 0.05 (50 million/1 billion).

Add all the tax levies up, and you get a mill levy of 0.16 or 160 mills (one mill = 0.001).

In general, mill levies are applied to real estate, land, buildings, and significant personal property such as cars and boats.

## How Is the Mill Levy Calculated?

The mill levy is calculated by dividing the total amount of revenue needed by the total value of all taxable properties in the area. The tax rates from each jurisdiction (school districts, county governments, etc.) are then combined to determine the total mill levy.

## Are Mill Levies Applied to Personal Property?

Yes, mill levies can be applied to personal property such as vehicles, boats, and other significant assets, in addition to real estate properties like land and buildings.  

## How Often Is the Mill Levy Rate Adjusted?

The mill levy rate can be adjusted annually or as needed, depending on the budget requirements of the local jurisdictions. If a jurisdiction needs more revenue to cover expenses, it may increase the mill levy rate. However, changes are typically subject to public hearings or approval by the local governing body.

## The Bottom Line

The mill levy is a vital part of property taxation, determining how much property owners must pay for local services like schools, infrastructure, and government operations. By understanding how the mill levy works and how it’s calculated, property owners can better anticipate their tax obligations and understand the impact of various tax rates from different jurisdictions.

If you're unsure about your mill levy or property tax, it’s helpful to consult a local tax advisor or government office.

> **Article Sources**
>
> 1.  Tax Foundation. "[How to Calculate Property Tax Liability](https://taxfoundation.org/how-calculate-property-tax-liability-2/)."