A tax assessor has determined that the fair market value of a property is $140,000. If the assessed value is 50% of fair market value and the tax levy is 42 mills, what are the annual taxes?

Rationale

The annual taxes are $1,176.

To calculate the annual taxes, first determine the assessed value by taking 50% of the fair market value, which is $140,000. This results in an assessed value of $70,000. Then, applying the tax levy of 42 mills, or $42 per $1,000 of assessed value, leads to total annual taxes of $1,176.

A ($667) YOUR ANSWER

This amount represents a calculation that may arise from an incorrect interpretation of the assessed value or tax rate. It does not align with the established formula needed to determine the total annual taxes based on the assessed value of the property and the tax levy.

B ($1,176) CORRECT

This is the correct calculation for the annual taxes. The assessed value of $70,000 multiplied by the tax rate of 0.042 (42 mills) yields the total taxes owed as follows: $70,000 × 0.042 = $2,940, and dividing by 1,000 gives $1,176. This reflects the proper application of the tax levy to the assessed property value.

C ($1,667) YOUR ANSWER

This figure could result from an erroneous calculation of either the assessed value or a misunderstanding of how mills convert to tax dollars. It does not reflect the correct multiplication of the assessed value by the tax rate and, therefore, cannot be the annual tax amount.

D ($2,940) YOUR ANSWER

While this figure reflects the product of the assessed value ($70,000) and the tax rate in mills (42), it fails to properly account for the conversion between mills and dollars. The correct annual tax amount is derived by dividing this result by 1,000, leading to the accurate figure of $1,176.

Conclusion

The annual taxes owed on the property, computed from its assessed value and the applicable tax levy, amount to $1,176. This conclusion underscores the importance of understanding how to properly calculate property taxes by applying the assessed value against the tax rate expressed in mills. The other choices misapply these principles, leading to incorrect tax amounts.

A tax assessor has determined that the fair market value of a property is $140,000. If the assessed value is 50% of fair market value and the tax levy is 42 mills, what are the annual taxes?

The annual taxes are $1,176.

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