What formula is used to compute real estate property taxes?

The computation of real estate property taxes relies on accurately determining the assessed value of the property, which is derived from the fair market value, and then applying a tax rate or millage rate to that assessed value. This is where the formula utilizing the fair market value, the assessment ratio, and the millage rate comes into play.

The fair market value represents the amount for which the property would sell on the open market. However, properties are often not taxed at their full market value; instead, they are taxed based on an assessed value, which is computed by multiplying the fair market value by the assessment ratio. The assessment ratio is the percentage of the fair market value that is subject to taxation.

Once the assessed value is established, the next step is to apply the millage rate, which is a tax rate expressed in mills per dollar of assessed value. This is where the multiplication of the assessed value by the millage rate comes into effect.

Thus, the correct formula—fair market value multiplied by the assessment ratio and then multiplied by the millage rate—correctly represents how real estate property taxes are calculated. It encapsulates all necessary components: starting from the market value, adjusting for the assessment ratio to find the taxable value, and finally applying