Chapter 14: Real Estate Taxes

Question 1

There are 2 types of taxes applied to real estate?

Answer 1

Ad valorem taxes and Special Assessment taxes

Question 2

Personal property is based on what type of taxes?

Answer 2

Ad valorem

Question 3

What are ad valorem taxes?

Answer 3

Taxes based on the value of one’s property

Question 4

How does a local government determine how much to tax?

Answer 4

1. A budget is set
2. All properties in the city are appraised
3. Add up normal funding sources for the city
4. Subtract that amount from the budget
5. The remaining amount must come from prop. taxes

Question 5

What is the appropriation process?

Answer 5

The process of enacting into law a budget with list of sources approved to fund the budget

Question 6

Who determines the value of each property?

Answer 6

The city assessor (assessor’s office)

Question 7

The assessor’s “appraised value” is the _______ “fair market value” of the property.

Answer 7

estimated

Question 8

What does the appraised value get turned into for tax purposes?

Answer 8

The assessed value. Taxes are based on the assessed value not the appraised value.

Question 9

Property taxes are based off the __________ value.

Answer 9

Assessed

Question 10

The personal property tax rate can be expressed 3 ways

Answer 10

1. Milli Rate: mills per dollar
2. Dollars per hundred
3. Dollars per thousand

4 cents (4/100) or 4 cents/dollar= 40 mills = $40/1000

Question 11

What are the assessment rolls?

Answer 11

The assessed values or all lands and buildings are made public

Question 12

Who does one appeal before if he disagrees with his property’s assessment?

Answer 12

Assessment appeals board

Question 13

What is the purpose of the Board of equalization?

Answer 13

They make sure property taxes are equalized between counties so one group doesn’t pay way more than another.

Question 14

Who is exempt from property taxes?

Answer 14

1. Govt. owned offices
2. Govt. owned utilities
3. Public roads
4. Public parks
5. Schools
6. Military bases
7. Most property owned by religious or charitable orgs.
8. In rural areas, large tracts of land owned by fed/state govt.

Question 15

What is a special assessment?

Answer 15

Taxes charged to specific communities due to improvements that the community will benefit from

Question 16

The specific community in a special assessment who receives the benefit from the improvement is called?

Answer 16

Improvement district or assessment district

Question 17

What is a public improvement?

Answer 17

An improvement that benefits everyone in the city/county.

Question 18

What form is submitted by the IRS that shows the amount of interest the homeowner paid on the loan

Answer 18

Form 1098

Question 19

What is imputed interest?

Answer 19

Interest implied by law when a note fails to mention the interest rate or if the rate is unreasonably low. (IRS will assign new rate)

This prevents the seller from increasing the purchase price and assigning a very low rate to keep from paying taxes on earned interest.

Question 20

What is a 1099-S

Answer 20

A form used to ensure that the full amount received for a real estate sale of some kind is accurately reported

It notifies the IRS that someone purchased a home