Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller

Exercise 3

Explain the difference between fair market value, assessed value, and property tax. (See Objectives 1, 2, and 3.)
Define fair market value and assessed value. A local tax assessor estimates the market value of all the land and buildings in an area. The fair market value is the price at which a property can reasonably be expected to be sold. The fair market value could be used to find the amount of the property tax. However, many tax authorities first find what is called the assessed value, by multiplying the fair market value by a percent called the assessment rate. The assessed value is then used to calculate the property tax. In fact, the only purpose of the assessed value is for use in finding the property tax. The assessment rate varies widely from 25, in some states to 100, in others.

O BJ ECT IV E 2 Find the tax rate. A taxing authority such as a city or community college district first estimates the revenue needed and then finds the property-tax rate needed to generate that amount of tax as follows.
Finding the Property-Tax Rate
Step 1 Identify the amount of money needed.
Step 2 Find the total fair market value of all real properties in the tax district.
Step 3 Find the total assessed value of all real properties in the tax district.
Step 4

O BJ ECT IV E 3 Find the property tax. The tax rate is applied to the assessed value to find the property tax due as follows.