How Property Tax Is Calculated, With Real Examples

By MillRate USA · Last reviewed 2026-10-27

The formula

Tax = taxable value × rate ÷ the rate's unit, then minus credits and limited by any caps.

If the rate is in mills or dollars per $1,000, divide by 1,000.
If it's per $100 or a percent, divide by 100.

A rate of 25 mills is the same as $2.50 per $100 and 2.5%. States just quote it differently: Connecticut and Michigan use mills, Iowa dollars per $1,000, and Indiana, Maryland, New Jersey, North Carolina, Texas and Virginia dollars per $100. The rate units guide and rate converter switch between them.

Three values, and which one to use

Your notice can show up to three different values. The rate applies to the last one.

Market value: what the property would likely sell for.
Assessed value: the value the assessor records. Some states set it at market value; others at a fixed share of it.
Taxable value: assessed value after state limits, exemptions and deductions. This is the number to multiply by the rate.

The gap between them varies a lot by state:

Connecticut assesses at 70% of market value. A home worth $400,000 at the last revaluation is assessed at about $280,000.
Iowa taxes a home on a share of assessed value set each year, the residential rollback: 44.5345% for 2026–27 bills.
Michigan assesses at about half of market value, and taxable value can rise by no more than 5% or inflation a year until the home sells.
Texas limits a homestead's appraised value increase to 10% a year, and school districts must exempt $140,000 of a homestead's value.
New Jersey and North Carolina revalue at different times in different places, so assessed values can sit well above or below market. That's why both states also publish an effective rate for comparing places, separate from the rate on your bill.

Which rate: one, or several added together

Your bill's rate is the total of every unit that taxes your property: county, city or town, school district, and often special districts. Some states publish that total; others publish each piece.

One published rate per town: Connecticut, Massachusetts, New Jersey and Rhode Island.
A published total per tax district: Indiana and Iowa certify one combined rate for each district, and Michigan publishes the total millage for each township, city or village by school district.
Layers you add up: in Maryland, North Carolina and Virginia, a town's rate sits on top of the county's. In Texas, every unit sets its own rate, and your bill lists the ones that apply to you.

Caps and credits applied after the math

Indiana caps a bill at 1% of gross assessed value for a homestead, 2% for other residential property and farmland, and 3% for other property. Where rate × value is higher, a credit brings the bill down to the cap.
Maryland's homestead credit limits how much an owner-occupied home's taxable assessment can rise each year: 10% for state tax, and a cap each county and town sets for local tax.
Michigan's principal residence exemption removes up to 18 mills of school operating tax from a home you live in, which is why Michigan pages show a homestead and a non-homestead rate.

A worked example

Take a rental house in Fishers, Indiana, assessed at $300,000, with no deductions, in the tax district with a 2.1994 rate per $100:

$300,000 × 2.1994 ÷ 100 = $6,598 before caps. A rental is in Indiana's 2% cap class, and 2% of $300,000 is $6,000, so the bill is limited to $6,000. If it were the owner's homestead instead, the homestead deductions would lower the value first, and the cap would be 1%.

Do it for your home

Find your place on the states page: each page has the published rate, its history and a calculator, or start from the property tax calculator. Then check when the bill is due and how to appeal your value.

Sources

This guide explains how the system works. It isn't legal or tax advice. Spotted an error? Email [email protected].

How property tax is calculated