When it comes to property ownership, there are a variety of tax-related terms that property owners are likely to encounter. One of the most common terms is the millage rate, but property taxes also involve several other key terms that you should be familiar with. In this guide, we’ll explore the meaning of millage rates and a few other essential property tax terms to help you better understand your property taxes and manage your finances.
Millage Rates
The term millage rate may sound a bit confusing at first, but it's not related to mills or milling. Instead, the term originates from the Latin word millesimum, which means "one thousandth" (1/1000).
Simply put, a millage rate is the amount per every $1,000 of a property’s assessed value that property owners are required to pay in taxes. For example, if the millage rate is 20 mills, you’ll pay $20 for every $1,000 of your property’s value in taxes. When you receive your property tax bill, keep in mind that multiple millage rates might be applied, depending on the local tax authorities involved.
Liens
A lien is a legal claim against your property, usually placed when you fail to pay your taxes. Liens can apply not only to real estate (land and buildings) but also to other types of property, like motor vehicles.
If you fail to settle your outstanding property taxes, a lien may be placed on your property, essentially putting the government in a position to claim your assets until the debt is settled. This means the property cannot be sold without first addressing the tax obligations.
Levies
A tax levy is a more severe consequence of not paying your taxes. It can result in the government actually taking ownership of your property to satisfy the unpaid debt. This could mean the IRS (or local government) seizing and even selling your property or assets to cover your tax liabilities.
A levy doesn't happen right away—it typically follows a lien that hasn’t been resolved. If you find yourself in a situation where a levy is on the horizon, it’s important to act quickly to resolve any outstanding tax debts before the government takes more aggressive action.
Ad Valorem
The term ad valorem comes from the Latin phrase meaning "according to value." This type of tax is based on the value of an asset—whether it’s a property or another type of item.
In terms of property taxes, ad valorem means that the amount you pay in taxes will be a percentage of your property’s assessed value or sale price. This flexible system allows for taxes to adjust according to the market value of the property, meaning the tax rate can change over time as the property value fluctuates.
By understanding these key terms—millage rates, liens, levies, and ad valorem—you’ll be better prepared to navigate the world of property taxes and ensure that you stay on top of your financial obligations.
If you're looking for more information on property tax laws and how they might apply to your specific situation, don't hesitate to reach out to a tax professional. With the right knowledge and resources, you can ensure you're making the most informed decisions when it comes to managing your property taxes.
