The purchase price for a new home was $350,000. 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 $368,000 and the assessed value was $360,000. What will the buyer pay for one year's property taxes if the tax rate is 4%

Rationale

$14,400

To calculate the property taxes, we first need to determine the assessed value of the home, which is $360,000. The property tax is then calculated by applying the tax rate of 4% to this assessed value, resulting in a total tax amount of $14,400 for one year.

A ($14,000) YOUR ANSWER

This amount represents a miscalculation based on an incorrect application of the tax rate. If we were to take a different base value or mistakenly use 3.9% instead of the correct 4%, it might yield a figure close to $14,000, but it does not accurately reflect the assessed value applied with the correct tax rate.

B ($11,200) YOUR ANSWER

This choice results from either miscalculating the assessed value or using an incorrect percentage for the tax rate. A tax rate of 4% applied to $360,000 yields a much higher figure of $14,400, thus making $11,200 an inaccurate reflection of the property taxes owed.

C ($14,400) CORRECT

This is the accurate calculation, obtained by multiplying the assessed value of $360,000 by the tax rate of 4%. The result is $14,400, confirming that this is the amount the buyer will pay for one year's property taxes.

D ($14,720) YOUR ANSWER

This figure could be derived from a slight miscalculation, such as incorrectly applying a tax rate of 4.1% to the assessed value. However, using the correct tax rate of 4% yields a total of $14,400, making $14,720 an incorrect choice.

Conclusion

The property tax owed by the buyer is derived from the assessed value of the home and the applicable tax rate. In this case, applying the 4% tax rate to the assessed value of $360,000 results in a total property tax of $14,400 for the year. This calculation is essential for budgeting and financial planning related to homeownership.

$14,400

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