The purchase price for a new home was $200,000. The buyer put down 20% and the balance was a mortgage for 80% of the purchase price. The appraised value at the time of closing was $217,000 and the assessed value was $214,000. What will the buyer pay for one year's property taxes if the tax rate is 3%?

Rationale

The buyer will pay $6,420 for one year's property taxes.

To calculate the property taxes, we use the assessed value of the home, which is $214,000. By applying the tax rate of 3%, the annual property tax is computed as $214,000 multiplied by 0.03, resulting in $6,420.

A ($6,000) YOUR ANSWER

This amount appears to be a miscalculation based on an incorrect assessment of the tax rate or property value. A tax of $6,000 would imply a rate of approximately 2.8%, which does not match the given tax rate of 3%.

B ($4,800) YOUR ANSWER

This choice suggests that the property tax is calculated based on an incorrect value or tax rate. A property tax of $4,800 would imply an assessment of around $160,000 at a 3% tax rate, which does not correspond with the assessed value of $214,000.

C ($6,420) CORRECT

This is the correct answer as it accurately reflects the property tax calculated from the assessed value. Multiplying $214,000 by the tax rate of 3% yields exactly $6,420, confirming this as the right choice.

D ($6,510) YOUR ANSWER

This figure results from a miscalculation, possibly involving an incorrect assumption about either the assessed value or the tax rate. At 3%, the calculated property tax cannot exceed $6,420, making $6,510 incorrect.

Conclusion

The buyer's annual property tax payment is determined by applying the 3% tax rate to the assessed value of $214,000, resulting in a total of $6,420. The other options misrepresent the calculations, either by misapplying the tax rate or using incorrect property values. This highlights the importance of accurate assessments in determining property tax obligations.

The buyer will pay $6,420 for one year's property taxes.

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