How property taxes are calculated
You can use the following formula to calculate the amount you pay in property, county, school, or special district taxes:
Taxes owed = taxable assessment x property tax rate per thousand
Taxable assessment: Your property's taxable assessment is the assessed value of your property as determined by your local assessor minus any exemptions that have been granted to you.
Property tax rate: the percentage at which your property is taxed. Generally, the property tax rate is expressed as a percentage per $1,000 of assessed value.
Tax rates are calculated by local jurisdictions
Determining tax rates
- The taxing jurisdiction (school district, municipality, county, special district) develops and adopts a budget.
- The taxing jurisdiction determines the amount of revenue collected from all sources (state aid, sales tax revenue, user fees, etc.) other than the property tax.
- The total amount of revenue is subtracted from the budget. The remainder is the amount that must be raised from all property owners within the municipality. This amount is referred to as the Tax levy.
Tax levy = budget - revenues - To determine the tax rate, the taxing jurisdiction divides the tax levy by the total taxable assessed value of all property in the jurisdiction.
- Because tax rates are generally expressed as "per $1,000 of taxable assessed value," the product is multiplied by 1,000:
Tax rate per thousand = (tax levy ÷ total of all taxable assessments in jurisdiction) x 1,000
For example:
- Town A's tax levy = $2,000,000
- Town's total taxable assessed value = $40,000,000
- Tax rate = $50 per $1,000 of taxable assessed value
- Tax bill for property with a taxable assessment of $150,000 = $7,500
Equalization rates are necessary to calculate tax rates for counties. because they include multiple municipalities, and for school districts, because most cross municipal boundaries.
Your tax bill may vary each year
The total amount of your tax bill will likely change every year due to changes at the school district or local government level. Changes to the following will directly impact the amount of taxes you owe each year:
- budgets
- revenue
- total taxable assessed value
- tax levy distribution among multiple municipalities
Changes in your assessment or exemptions can also impact your tax bill.
Do you believe your property taxes are too high?
First, you should consider whether your assessment is accurate. To learn how to determine if you’re assessed fairly and what to do if you aren’t, see Contest your assessment.
If your assessment is fair, but you still believe your taxes are too high, you should:
- examine the scope of your taxing jurisdictions' budgets and expenditures
- address your concerns to the appropriate forum, such as meetings of the school board, city council, town board, or county legislature.