The purchase price for a new home was $400,000. 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 $415,000 and the assessed value was $417,000. What will the buyer pay for one year's property taxes if the tax rate is 3.5%?

Rationale

The buyer will pay $14,595 for one year's property taxes.

To calculate the property taxes, we use the assessed value of the home, which is $417,000, and apply the tax rate of 3.5%. This results in property taxes of $14,595 for the year.

A ($14,000) YOUR ANSWER

This option incorrectly calculates the property taxes. To arrive at $14,000, one would need a tax rate of approximately 3.36%, which does not match the provided tax rate of 3.5%. Thus, this figure is not representative of the actual tax owed based on the assessed value.

B ($11,200) YOUR ANSWER

This choice significantly underestimates the property taxes. A tax amount of $11,200 would imply an assessed value much lower than $417,000 or a tax rate below 2.68%, which does not align with the stated tax rate of 3.5%. Therefore, this option is incorrect.

C ($14,595) CORRECT

This is the correct answer, derived from multiplying the assessed value of $417,000 by the tax rate of 3.5%. This calculation accurately reflects the property tax owed for the year.

D ($14,530) YOUR ANSWER

This choice slightly underestimates the property taxes. A tax amount of $14,530 would suggest a tax rate of around 3.48%, which does not correspond to the actual tax rate of 3.5%. This discrepancy indicates that this option is not the correct calculation for the property taxes.

Conclusion

In summary, the buyer's property taxes are calculated using the assessed value of $417,000 and the tax rate of 3.5%, resulting in an annual payment of $14,595. Other options either misapply the tax rate or reflect incorrect calculations, demonstrating the importance of accurate assessments in property tax computations.

The buyer will pay $14,595 for one year's property taxes.

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