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 $261,000 and the assessed value was $266,000. What will the buyer pay for one year's property taxes if the tax rate is 4%?

Rationale

The buyer will pay $10,640 for one year's property taxes.

To calculate the annual property taxes, we need to apply the tax rate of 4% to the assessed value of $266,000. The formula for property tax is: (Assessed Value) x (Tax Rate). Thus, $266,000 x 0.04 equals $10,640.

A ($10,000) YOUR ANSWER

This amount results from applying a lower tax rate or using an incorrect assessed value. When using 4% on the assessed value of $266,000, the calculation yields a much higher tax amount than $10,000. Therefore, this choice does not accurately reflect the property tax owed.

B ($8,000) YOUR ANSWER

This figure appears to be derived from a miscalculation or an incorrect application of the tax rate. By applying 4% to any value below $200,000 would yield this result, but it does not take into account the actual assessed value of $266,000, making this option invalid.

C ($10,640) CORRECT

This is the correct calculation of property taxes for the assessed value of $266,000 at a 4% tax rate. The computation is straightforward: $266,000 x 0.04 equals $10,640, reflecting the buyer's true tax obligation for the year.

D ($10,440) YOUR ANSWER

This choice seems to be a slight miscalculation, potentially from rounding errors or incorrect assumptions about the value used. The correct calculation using the assessed value of $266,000 and the tax rate of 4% does not yield this figure, making it inaccurate.

Conclusion

The buyer's annual property taxes are determined by multiplying the assessed value of $266,000 by the tax rate of 4%, resulting in $10,640. This correct calculation demonstrates the importance of accurate values and rates when estimating property taxes, as the other options either misinterpret the assessed value or apply incorrect rates. Thus, option C accurately represents the buyer's tax liability for the year.

The buyer will pay $10,640 for one year's property taxes.

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