Real Estate Term of the Day: Mill & Levy

Real Estate Term of the Day: Mill & Levy

MILL – one tenth of a cent. Used in expressing tax rates on a per-dollar basis (Barron’s Dictionary of Real Estate Terms) 

LEVY – to legally impose or collect that which is due (Barron’s Dictionary of Real Estate Terms) 

According to Investopedia, a mill levy is defined as the assessed property tax rate used by local governments and other jurisdictions to raise revenue in order to cover annual expenses. The mill levy is calculated by determining how much revenue each taxing jurisdiction will need for the upcoming year, then dividing that projection by the total value of the property within the area, and finally adding up the rate from each jurisdiction to get the mill levy for the entire area.

Property taxes are calculated using the following 2-step formula:

STEP 1: Appraised Value X Designated Assessment Rate = Assessed Value

STEP 2: Assessed Value X Mill Levy ÷ 1,000 = Taxes Due

Here is an example for 123 Main Street using this formula to calculate taxes due:

STEP 1:

  • Actual Value = $500,000
  • Assessment Rate (set by the State for residential properties) = 7.96% (2013 and 2014)
  • Assessed Value = $39,800

STEP 2:

  • Assessed Value = $39,800
  • Mill Levy = 91.23
  • Taxes Due =$3,630.96

Boulder County Assessor’s office states that, for residential properties, the assessment percentage is subject to change by the Colorado Legislature each odd-numbered year. The change in percentage is intended to balance the tax burden between residential and all other properties. For the current appraisal period, the residential assessment rate is 7.96% (2013 – 2014). For the up coming appraisal period, the residential assessment rate will be 8.24% (2015 – 2016).

 

See also: ASSESSED VALUE, How Taxes are Levied in The State of Colorado