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Chapter 15: Taxes and Assessments
appraisal & assessmentad valorem taxes = according
to valuesource of income for local
government tax district appraises all
taxable propertytax rate calculation
PROPERTY TAXES
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Expressing Property Tax Rates
Mill Rate Dollars perHundred Thousand
Schooldistrict
40 mills $4.00 $40.00
City 30 3.00 30.00
County 10 1.00 10.00
Total 80 mills $8.00 $80.00
Dollars per
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• 85 mills = .085• 215 mills = 2.15• 5 mills = .005
Move decimal: • Tax appraised value• Assessed value• Millage rate
(e.g., 80 mills; see previous slide)
Result: Tax Bill
Calculations using Mills
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Unpaid property taxes
Assessment appealProperty tax
exemptionProperty tax
variationsSpecial assessments
OTHER TAXING MATTERS
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Basis is the price originally paid for the home plus any fees paid for closing and
improvements.
FEDERAL INCOME TAX
© 2010 by South-Western, Cengage Learning
To calculate the gain you must take the sale price and subtract the selling expenses; then subtract the basis to determine the gain.
CAPITAL GAINS
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Purchase price $90,000; closing costs are $500 Basis $ 90,500Add landscaping and fencing for $3,500 Basis $ 94,000Add 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 $117,000Less basis -$109,000
Equals gain $ 8,000
Calculation of Gain
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Sale of principal residenceUsed for 2 of the last 5 yearsMarried – exclude up to $500,000
gainSingle – exclude up to $250,000
gain
INCOME TAX EXCLUSION
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15% to 20% If property held longer than 1 year
CAPITAL GAINS TAX RATE
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Selling price of old homeLess selling expensesLess fix-up costsEquals adjusted sales price
$250,000
-18,000
-7,000
$225,000
Adjusted Sales Price
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INSTALLMENT METHOD
Sale of real estate in which the proceeds of the sale are deferred beyond the year of sale
Tax Deductions
• State & local real estate taxes• Interest with limits• Other deductions
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Impact on Real EstateAgent’s Liability for Tax Advice
Conveyance Taxes
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TAX RULES FOR REAL ESTATE ARE CONTINUALLY CHANGING
Ad valorem taxes Adjusted basis Assessed value Assessment appeal
board Basis
Documentary tax Installment method Mill rate Tax certificate Tax lien
Key Terms
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