The purchase price for a new home was $250,000. 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 $268,000 and the assessed value was $263,000. What will the buyer pay for one year property taxes if the tax rate is 2%?

Rationale

The buyer will pay $5,260 for one year of property taxes.

To calculate the property taxes, we apply the tax rate of 2% to the assessed value of the home, which is $263,000. The formula for property tax is (Assessed Value) x (Tax Rate), which results in $263,000 x 0.02 = $5,260.

A ($5,000) YOUR ANSWER

This choice represents a calculation of 2% based on a lower assessed value, specifically $250,000, which is the purchase price rather than the assessed value. Using this figure, the property tax would be $250,000 x 0.02 = $5,000, but it is not relevant since the assessed value is $263,000.

B ($4,000) YOUR ANSWER

This option suggests a tax amount that implies an assessed value of $200,000, calculated as $200,000 x 0.02 = $4,000. However, this is incorrect as the assessed value is $263,000, and the calculation does not align with the actual figures provided in the question.

C ($5,260) CORRECT

This is the correct answer, as it accurately reflects the calculated property taxes based on the assessed value of $263,000 and the given tax rate of 2%. The calculation used here is straightforward and in accordance with standard property tax assessment practices.

D ($5,360) YOUR ANSWER

This option would correspond to an incorrect assessed value calculation. If the assessed value were $268,000, then the property tax would be $268,000 x 0.02 = $5,360. However, since the assessed value is stated as $263,000, this figure does not apply.

Conclusion

The property tax owed by the buyer is calculated based on the assessed value of the home, which is $263,000 at a tax rate of 2%. Therefore, the correct annual property tax amount is $5,260, as derived from the appropriate calculations. All other options either misrepresent the assessed value or use incorrect figures, leading to erroneous conclusions.

The buyer will pay $5,260 for one year of property taxes.

Related Questions

Related Quizzes

How familiar were you with this question?

Report an Issue

Rate this Practice Test