Understanding Property Taxes

By Rayana Martin | July 19, 2023

What is property tax?

Every year, millions of homeowners pay property taxes. Property tax is a tax paid on property owned by an individual or other legal entity, such as a corporation. Most commonly, property tax is an ad-valorem tax–which means it’s based on the property’s assessed value.

Property taxes are a major source of income for city and county governments. The different boards, councils, and legislatures meet to decide the appropriate rates. They hold budget hearings to determine how much money needs to be allocated for providing the various services required by the local community. These services—such as education, water and sewer improvements, transportation, road and highway construction, emergency, law enforcement, fire protection, parks, recreation, and libraries—are funded by property taxes. 

So, what is a tax rate?

A tax rate is a percentage at which an individual or corporation is taxed. The tax rate for property is called millage rate or mill levy. It is calculated by determining how much revenue each tax jurisdiction will need for the upcoming year to fund its budget for public services. That revenue is then divided by the total value of all property within the area. A municipality will hire a tax assessor who assesses the value of the properties in the area. Finally, the rate from each jurisdiction is added to obtain the mill levy for the entire area. As an example, let’s say the entire property value in the area is $1 billion, and the school district needs $100 million in revenue, the county needs $10 million, and the city needs $50 million. The tax levy for the school district would be 0.10 ($100 million divided by $1 billion). The tax levy for the county would be 0.01, and the tax levy for the city would be 0.05. Add all the tax levies up, and you get a mill levy of 0.16.

Revenue needed for schools / Total property value in the area = school mill levy

Revenue needed for city / Total property value in the area = city mill levy

Revenue needed for county / Total property value in the area = county mill levy

School mill levy + City mill levy + County mill levy = Total mill levy

The amount owners owe in property tax is also determined by “fair market value” and “assessment rate.” Fair market value (FMV) is the price a knowledgeable buyer would pay for a property and a willing seller would accept for it. An assessment rate is the percentage of a property’s value that is subject to the mill levy. In Georgia, property is required to be assessed at 40% of the fair market value unless otherwise specified by law.

For example, a homeowner whose home has a fair market value of $100,000 with a 40% assessment rate would have $40,000 of their home’s value be subject to the mill levy. Following the millage rate example from before, the homeowner would pay 0.16, or 16% of taxes on that $40,000 totaling to $6,400 in property taxes for that year.

$100,000 (FMV) x 40% (assessment rate) = $40,000 (assessed value)

$40,000 (assessed value) x 0.16 (mill levy) = $6,400 (property tax owed)

Click here to find out what your millage rate is in your county.

When are pay property taxes paid?

Tax assessments for the purpose of determining ad valorem taxes are typically calculated as of January 1 each year. Unless otherwise specified, property tax returns are to be filed between January 1 and April 1 with the county tax commissioner’s office. For most counties in GA, taxes are due by December 20, but this may vary from county to county. If taxes are not collected on the property, it may be levied upon and ultimately sold.

In addition to real estate, many states impose a tax on certain personal property, which is also usually based on the property’s assessed value. That can include mobile homes, cars, motorcycles, and boats. Those rates can vary widely as well, depending on where you live.

Here is some useful information about property taxes in Georgia and DeKalb County.

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