The purchase price for a new home was $225,000. 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 $239,000 and the assessed value was $240,000. What will the buyer pay for one year's property taxes if the tax rate is 3.5%?

Rationale

The buyer will pay $8,400 for one year's property taxes.

To calculate the annual property taxes, we apply the tax rate of 3.5% to the assessed value of the home, which is $240,000. The calculation is straightforward: $240,000 x 0.035 = $8,400, resulting in the total property tax owed for the year.

A ($7,875) YOUR ANSWER

This amount is derived from applying a different tax rate or value, which does not reflect the provided assessed value or tax rate. Specifically, this figure may suggest an incorrect calculation or a misunderstanding of the assessed value’s role in determining property taxes.

B ($6,300) YOUR ANSWER

This answer seems to stem from a miscalculation, potentially from applying the tax rate to the purchase price instead of the assessed value. A proper calculation using the assessed value would not yield this figure when the correct tax rate is applied.

C ($8,400) CORRECT

This is the correct answer, which is calculated by multiplying the assessed value of $240,000 by the tax rate of 3.5%. The calculation is: $240,000 x 0.035 = $8,400, accurately reflecting the annual property taxes owed.

D ($8,370) YOUR ANSWER

This choice likely results from an approximate calculation that does not align with the exact values given. It may reflect a rounding error or misapplication of the tax rate, leading to an inaccurate total when properly calculated from the assessed value.

Conclusion

The annual property tax owed by the buyer is calculated by applying the tax rate of 3.5% to the assessed value of $240,000, yielding a total of $8,400. Understanding the distinction between purchase price and assessed value is crucial in accurately determining property tax obligations. All other answer choices reflect inaccuracies in the calculations or misinterpretations of the values provided.

The buyer will pay $8,400 for one year's property taxes.

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