Sec 12.1 Property Tax Objectives –Define fair market value and assessed valuation –Use the formula for tax rate –Use the formula for property tax –Express tax rate in percent, in dollars per $100, in dollars per $1000, and in mills –Find taxes given the assessed valuation and the tax rate.
What is property tax?
Property Tax –A tax levied on owners of real property (buildings and land) in exchange for services such as police and fire protection, schools, roads, etc.
The amount of property tax is based on a number of values.
First, the Fair Market Value for each piece of property in the community must be determined.
The amount of property tax is based on a number of values. First, the Fair Market Value for each piece of property in the community must be determined. The Fair Market Value (FMV), determined by an assessor, is the price at which the property could reasonably be expected to be sold.
The amount of property tax is based on a number of values. First, the Fair Market Value for each piece of property in the community must be determined. The Fair Market Value (FMV), determined by an assessor, is the price at which the property could reasonably be expected to be sold. Next, the assessed valuation of the property must be determined.
The Fair Market Value (FMV), determined by an assessor, is the price at which the property could reasonably be expected to be sold. Next, the assessed valuation of the property must be determined. The assessed valuation is found by multiplying the Fair Market Value by a percent known as the assessment rate.
Next, the assessed valuation of the property must be determined. The assessed valuation is found by multiplying the Fair Market Value by a percent known as the assessment rate. Assessed = Fair Market x Assessment valuation Value Rate
The assessed valuation is found by multiplying the Fair Market Value (FMV) by a percent known as the assessment rate. Assessed = Fair Market x Assessment valuation Value Rate In essence, the total amount of tax a community receives is some portion of the total assessed value of the community.
Assessed = Fair Market x Assessment valuation Value Rate In essence, the total amount of tax a community receives is some portion of the total assessed value of the community. Thus, Tax Total tax amount needed (budget) = Rate Total assessed value
Thus, Tax Total tax amount needed (budget) = Rate Total assessed value It follows that, Property Tax = Tax Rate x Assessed Valuation
There are four different ways to express the rate of taxation:
–Percent –Tax per $100 of assessed value –Tax per $1000 of assessed value –Mills
There are four different ways to express the rate of taxation, ie tax rate: –Percent –Tax per $100 of assessed value –Tax per $1000 of assessed value –Mills Note: I will expect “you” to be able to convert a given tax rate from one form into any of the other three forms.
Percent If the tax rate is 7.85% and the assessed value is $25,000 then Property tax = $25,000 x 7.85%
Percent If the tax rate is 7.85% and the assessed value is $25,000 then Property tax = $25,000 x 7.85% = $
Dollars per $100 If the tax rate is $7.85 per $100 and the assessed value is $25,000 then
Dollars per $100 If the tax rate is $7.85 per $100 and the assessed value is $25,000 then Property tax = $25, x 100
Dollars per $100 If the tax rate is $7.85 per $100 and the assessed value is $25,000 then Property tax = $25, x 100 = $
Dollars per $1000 If the tax rate is $78.50 per $1000 and the assessed value is $25,000 then
Dollars per $1000 If the tax rate is $78.50 per $1000 and the assessed value is $25,000 then Property tax = $25, x 1000
Dollars per $1000 If the tax rate is $78.50 per $1000 and the assessed value is $25,000 then Property tax = $25, x 1000 = $
Mill A mill is defined as one-tenth of one cent. Imagine a penny cut up into ten pie-shaped wedges. One mill would be equal to one of these wedges.
Mill A mill is defined as one-tenth of one cent. Imagine a penny cut up into ten pie-shaped wedges. One mill would be equal to one of these wedges. Thus if one mill is one-tenth of one cent and one cent is one-one-hundredth of a dollar, then one mill is one-one-thousandth of a dollar.
In other words, 1 mill = 0.1 of 1 cent and, 1 cent = $0.01
Thus if one mill is one-tenth of one cent and one cent is one-one-hundredth of a dollar, then one mill is one-one-thousandth of a dollar. In other words, 1 mill = 0.1 of 1 cent and, 1 cent = $0.01 Hence, 1 mill = 0.1 x $0.01 = $0.001
Converting Tax Rates PercentPerPerMills $100 $ % $7.85 $
Given a tax rate of $13.20 per $1000, find the equivalent tax rates in percent, mills and dollars per $100.
$13.20 per $1000 = mills
Given a tax rate of $13.20 per $1000, find the equivalent tax rates in percent, mills and dollars per $100. $13.20 per $1000 = mills $13.20 per $1000 = $1.32 per $100
Given a tax rate of $13.20 per $1000, find the equivalent tax rates in percent, mills and dollars per $100. $13.20 per $1000 = mills $13.20 per $1000 = $1.32 per $100 $13.20 per $1000 = 1.32%
Example 1 A new fire station has a fair market value of $354,400. The building is in an area where property is assessed at 35% of its fair market value and the tax rate is $69.30 per $1000 of assessed value. Find the property tax.
Step 1 Find the assessed value. Assessed Value = FMV x Assessment Rate
Step 1 Find the assessed value. Assessed Value = FMV x Assessment Rate Assessed = $354,400 x 35% Value
Step 1 Find the assessed value. Assessed Value = FMV x Assessment Rate Assessed = $354,400 x 35% = $123,900 Value
Step 2 Find the property tax. Property Tax = Assessed Value x Tax Rate
Step 2 Find the property tax. Property Tax = Assessed Value x Tax Rate Property $123,900 Tax = x $69.30 $1,000
Step 2 Find the property tax. Property Tax = Assessed Value x Tax Rate Property $123,900 Tax = x $69.30 $1,000 = $8,586.27
Note:In most cases, it may be simpler to first convert the tax rate to a percent and then compute the amount of property tax. For instance,
Note:In most cases, it may be simpler to first convert the tax rate to a percent and then compute the amount of property tax. For example: A tax rate of $69.30 per $1000 = a tax rate of $6.93 per $100.
Note:In most cases, it may be simpler to first convert the tax rate to a percent and then compute the amount of property tax. For example: A tax rate of $69.30 per $1000 = a tax rate of $6.93 per $100 = 6.93%. Thus, Property Tax = 6.93% x $123,900 = $8,586.27
Hwk. Sec 12.1, The Even