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Real Estate Principles Tenth Edition

Real Estate Principles Tenth Edition. Real Estate: An Introduction to the Profession Tenth Edition. Chapter 15 Taxes and Assessments. ___________________________. Property Taxes. appraisal & assessment ad valorem taxes = according to value source of income for local government

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Real Estate Principles Tenth Edition

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  1. Real Estate PrinciplesTenthEdition Real Estate: An Introduction to the Profession Tenth Edition

  2. Chapter 15Taxes and Assessments ___________________________

  3. Property Taxes • appraisal & assessment • ad valorem taxes = according to value • source of income for local government • tax district appraises all taxable property • tax rate calculation

  4. Mill Rate Dollars per Dollars per Hundred Thousand School 40 mills $4.00 $40.00 district City 30 3.00 30.00 County 10 1.00 10.00 Total 80 mills $8.00 $80.00 Apply the tax rate Expressing Property Tax Rates

  5. Calculations using Mills • Tax appraised value • Assessed value • Millage rate (e.g., 80 mills; see previous slide) Move decimal: • 85 mills = .085 • 215 mills = 2.15 • 5 mills = .005 Result: Tax Bill

  6. Other Taxing Matters • Unpaid property taxes • Assessment appeal • Property tax exemption • Property tax variations • Special assessments

  7. Federal Income Tax Basis is the price originally paid for the home plus any fees paid for closing and improvements.

  8. Capital Gains • To calculate the gain you must take the sale price and subtract the selling expenses; then subtract the basis to determine the gain.

  9. Calculation of Gain Purchase price $90,000; closing costs are $500 Basis $ 90,500 Add landscaping and fencing for $3,500 Basis $ 94,000 Add bedroom and bathroom for $15,000 Basis $109,000 Sell home for $125,000; sales commissions Amount realized $117,000 and closing costs are $8,000 Amount realized $117,000 Less basis -$109,000Equals gain $ 8,000

  10. Capital Gains Tax Rate • 15 percent • If property held longer than 1 year

  11. Income Tax Exclusion • Sale of principal residence • Used for 2 of the last 5 years • Married – exclude up to $500,000 gain • Single – exclude up to $250,000 gain

  12. Adjusted Sales Price Selling price of old home Less selling expenses Less fix-up costs Equals adjusted sales price $250,000 -18,000 -7,000 $225,000

  13. Ad valorem taxes Adjusted sales price Assessed value Assessment appeal board Basis Documentary tax Installment sale Mill rate Tax certificate Tax lien Key Terms

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