A mileage rate is a way of expressing the property tax rate based on the value of the property. It is calculated by dividing the sum into thousandths and is used in property tax assessments. The tax is based on the value of the real estate and is classified as an ad valorem tax. The taxable value of a home is assessed by a tax assessor and includes the value of the land and buildings.
A mileage rate is a way of expressing the property tax rate in a particular area. It refers to the amount that must be paid for every thousand dollars of the value of the property. Of course, a mileage rate can work the same way for any unit of currency, not just dollars.
The mileage rate works along the lines of a percentage rate. The difference is that mileage works by dividing the sum into thousandths, while percentage divides it into hundredths. Millage takes its name from mill, which comes from the Latin word for thousandth; the term equivalent to “percentage” is permille. Millage is used in property tax assessments as it generally makes for an easier calculation than using percentages. This is due to the general size of the numbers found when dealing with house prices.
The way the mileage rate is used is relatively simple. For example, in a local area, the mileage rate may be $12 United States dollars (USD) permissible. This means that the owner must pay $12 for every thousand dollars in the taxable value of his property. If that taxable value is $50,000 USD, then the tax due is $12 USD times 50, totaling $600 USD. The rate can be informally referred to as “factory” usage: in this example it would be described as a “12 factories” property tax rate.
A property tax calculated using a mileage rate is classified as an ad valorem tax. This means that it is based on a value, in this case of real estate, rather than a quantity. If the property tax were based on a fixed rate per home, regardless of its value, it would be known as a specific duty.
The phrase ad valorem can also be used less formally to refer to the taxable value of a home. This is a figure produced by a tax assessor who, despite the name, assesses property values rather than the tax itself. The way value is assessed can vary from place to place. It will not necessarily match the property’s current market value or have any direct connection to the actual purchase price since the home was last sold. In general, however, it will be in the same region as these figures.
In most cases, the assessment will cover both the value of the land itself and the value of the buildings. The latter value is sometimes referred to as the improvement value, the idea being that the land itself has not changed, but the addition of the building has improved the overall value of the property. In some areas, other personal property owned by the owner, such as particularly valuable vehicles, may also be considered.
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