Math – Real Estate Taxes – Real Estate Exam Prep
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Math – Real Estate Taxes – Real Estate Exam Prep


Let’s tackle some problems involving
real estate taxes. Let’s say a problem says a property with
a market value of $240,000 had a tax assessment rate of 25 percent.
What would be the assessed value? In this case the math problem gives us
one percentage, so that tells me I will need to draw one
T. I always like to put the percentage in
first if possible because the percentage always goes in the bottom right in our
T. So I’ll put 25 percent in the bottom
right. The total market value is $240,000.
That will be the whole amount and go in the bottom left.
So our formula tells us to multiply straight across.
So we will take $240,000 times 25 percent to give this an
assessed value of $60,000. That will be our part and that will be
our answer, $60,000. Let’s say a problem begins with
something like this. A property with a market value of 80,000
was assessed for tax purposes at 30 percent.
The mill rate for the taxes was 55. What would be the amount for the real
estate taxes? To begin with let’s discuss a mill rate.
A mill rate is a per thousand rate, which is where the taxes are based on a
per thousand of value. We will convert that to a percent rate
which would tie into our T formula. So we will have a tax rate here,
a mill rate for the taxes, and we’ll also have the assessed value
of 30 percent. So we will have 2 percentages,
which means we draw two T’s. Let’s begin with the assessed value.
Thirty percent in our first T goes in the bottom right.
The total value is 80,000. So our formula tells us to multiply
straight across. So we will take 80,000
times 30 percent to give us our part or assessed value of $24,000.
We pay taxes based on the assessed value.
We take the assessed value times the tax rate.
Here, the tax rate given is in mills,
which is 55. That would be 55 point zero,
zero. The easiest way to convert a mill rate
to a percentage is to simply take your decimal place and move it one place to
the left. So if we move that decimal one place to
the left, that will give us a 5.5
percent tax rate. We can then put this into our second T.
5.5 percent will go on the bottom right,
the assessed value of 24,000 will be the larger number that goes in
the bottom left. So our formula says to multiply straight
across. So we will take 24,000
times 5.5 percent and that would give us our part
or the taxes on this property of $1,320. And that would be our answer. A problem might say that a property with
a market value of $150,000 had a tax assessment rate of 20 percent.
The tax rate was $3 per hundred of assessed value.
Per hundred means percent, so that’s the same thing as three
percent. The amount of real estate taxes would
be? Once again,
they give us two percentages, which means I draw two T’s.
Let’s begin with the first T and figure out the assessed value.
The tax assessment rate is 20 percent, which goes in the bottom right.
The total market value is $150,000, which will be the whole amount,
the larger number, that goes in the bottom left.
Our formula says to multiply straight across.
So we will take $150,000 times 20 percent and that will give us
our part or our assessed value of $30,000.
The assessed value is what we pay the taxes on.
So in our second T, we know that the tax percentage is three
percent. That goes in the bottom right.
The assessed value will be the larger number,
30,000, that’s our whole amount that goes in the
bottom left. Once again our formula says to multiply
straight across. So we will take 30,000
times three percent and that will give us our part or the actual amount of
taxes of $900 on this property. $900 would be our answer. A problem might say that a property had
a tax assessment rate of 25 percent. The actual taxes paid for the year were
$1,500. If the tax rate was $6 per thousand
(Remember per thousand is a mill rate) the total value would be?
Well in this case, we will convert the mill rate to a
percentage rate. So once again in our math problem,
we have two percentages, therefore we draw two T’s.
Let’s begin with the actual taxes paid of $1,500.
And let’s look at that tax rate. $6 per thousand.
That would be 6.00 for our mill rate.
To convert a mill rate to a percentage, we take our decimal place and move it
one place to the left, so that will convert a 6.00
mill rate to a .6 percent tax rate on a percentage basis.
So in our first T, .6
percent goes in the bottom right for the tax rate,
our taxes for the year are the part, they’re a smaller number compared to the
value. So that goes up on top for the part.
So our T formula tells us to take the top number and divide by the bottom
number. So if we take $1,500
and divide by .6 percent,
that gives us an assessed value of $250,000
for the whole amount. Let’s next go to our second T formula
here to figure out the total value. All we have so far is the assessed
value. The assessed value represents 25 percent
of the total value. So in our second T,
25 percent goes in the bottom right, the assessed value of $250,000
would be the smaller number. It goes up on top for the part,
which now we know to divide the top number divided by the bottom number.
So we would take $250,000 and divide by 25 percent.
That gives us the total market value of $1,000,000.
$1,000,000 would be our answer.

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