Property taxes begin with the annual assessment, which is an estimate of the property's value. County assessors estimate the assessed value based on the market value of property. Market value is estimated from recent sales of similar property and from occasional physical inspections of the property. Regardless of market conditions, however, the assessed value cannot increase more than 5 percent each year unless the property is sold. Assessed value of properties owned by low-income seniors is frozen at the 1997 level.

A property's taxable value is determined by multiplying the assessed value times an assessment ratio. Counties can set assessment ratios for different types of property within limits set by the state. Assessment ratios must be between 10 and 15 percent, except for public utilities.

People who live in the property as their primary home may deduct a $1,000 homestead allowance from the taxable value before the tax is determined. Seniors, disabled persons and, beginning in 2009, veterans may qualify for extra homestead allowances and thus a lower tax bill.

Property tax rates are set in mills. A mill is $1 in tax for every $1,000 in taxable value. Each government sets its mill rate based on budgetary needs, subject to constitutional limits on mill rates and voter approval in most cases. County officials review and approve the mill rates and prepare property tax bills that add up all the mill rates for each government serving a property to determine an overall mill rate for each property. Mill rates are commonly in the range of 90 to 110. These rates would result in a yearly tax bill of $900 to $1,100 on a $100,000 owner-occupied home.

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