© 2008 by South-Western, Cengage Learning Chapter 15 Charles J. Jacobus Thomas E. Gillett

© 2008 by South-Western, Cengage Learning Georgia Real Estate An Introduction to the Profession Seventh Edition Chapter 15 Taxes and Assessments

© 2008 by South-Western, Cengage Learning Property Taxes Property Taxes Budget and Appropriation Appropriation process Appraisal and Assessment Assessed Value: all taxable property is appraised Ad Valorem Taxes According to value

© 2008 by South-Western, Cengage Learning Property Taxes Property Taxes

© 2008 by South-Western, Cengage Learning Property Taxes Property Taxes

© 2008 by South-Western, Cengage Learning Mill RateDollars per HundredThousand School district 40 mills$4.00$40.00 City County Total80 mills$8.00 $80.00 Dollars per Apply the Tax Rate

© 2008 by South-Western, Cengage Learning Calculations using Mills 85 mills = mills = mills = mills = mills = mills =.005 Move decimal: Tax appraised value Assessed value Assessed value Millage rate (e.g., 80 mills; see previous slide) Millage rate (e.g., 80 mills; see previous slide) Result: Tax Bill

© 2008 by South-Western, Cengage Learning Other Taxing Matters Other Taxing Matters Unpaid property taxes Redemption Period Property sold at auction Tax Deed Georgia: tax certificate / certificate of sale Redemption period is one year

© 2008 by South-Western, Cengage Learning Other Taxing Matters Other Taxing Matters Assessment Appeal Assessment Rolls - assessed values of all property within the jurisdiction Assessment Appeal Board - rules on property owner’s complaint of over assessment Board of Equalization - reviews and adjusts taxes to achieve parity

© 2008 by South-Western, Cengage Learning Other Taxing Matters Other Taxing Matters Property Tax Exemptions Government and government agencies Religious and charitable organizations Hospitals Cemeteries Tax reductions to relocating businesses Senior citizens Property Tax Variations

© 2008 by South-Western, Cengage Learning Special Assessments Improvement district Public improvement: benefits the public in general Forming the improvement District Confirmation Local government ordinance is passed

© 2008 by South-Western, Cengage Learning Special Assessments Bond Issues Spreads the cost over a period of years Apportionment Front foot basis

© 2008 by South-Western, Cengage Learning Tax owed on profit from selling an asset held for more than one year.

Calculating the Basis Calculating the Basis

© 2008 by South-Western, Cengage Learning Calculation Amount Realized

© 2008 by South-Western, Cengage Learning Calculating the Gain on Sale

© 2008 by South-Western, Cengage Learning $90,000 Purchase price + $500 closing costsBasis $ 90,500 $3,500 landscaping and fencingBasis $ 94,000 $15,000 Bedroom and bathroomBasis $109,000 $125,000 Sales Price $8,000 commissions and closing costsAmt. realized $117,000 Less basis -$109,000 Equals gain $ 8,000 Calculation of Gain

© 2008 by South-Western, Cengage Learning Income Tax Exclusion Income Tax Exclusion Owned & lived in house any 2 of the last 5 years Married filing jointly – exclude up to $500,000 Single – exclude up to $250,000

© 2008 by South-Western, Cengage Learning Capital Gains Tax Rate Tax Bracket 1/1/01 – 5/5/03 5/6/03 – 12/31/ % & 15% 8% / 10% 5% 0% 10% 25% & up 20% 15% 20%

© 2008 by South-Western, Cengage Learning Capital Gains Installment Method Seller finances the sale The tax on the gain is spread

© 2008 by South-Western, Cengage Learning Property Tax & Interest Deductions State & local real estate taxes Mortgage Interest Interest on Improvement District Bonds Prepayment penalties Discount points

© 2008 by South-Western, Cengage Learning Interest Deduction Limitations Principal Residence & one other $1,000,000

© 2008 by South-Western, Cengage Learning Taxes Impact on Real Estate Agent’s Liability for Tax Advice GA. Conveyance Tax Ten cents per $100 or any part of $100 Sales price minus any assumable loan

© 2008 by South-Western, Cengage Learning Key Terms Key Terms Ad valorem taxes Adjusted sales price Assessed value Assessment appeal board Basis Documentary tax Installment sale Mill rate Tax certificate Tax lien