Knight has a property tax base with an appraised value consisting of $142,000,000 of taxable real property and $78,000,000 of taxable personal property. The assessment ratio is 50%. Exemptions for the elderly reduce assessed value by $3,000,000. The city has a planned budget of $3,500,000 and expect to receive $750,000 in none property tax revenue. Compute the statutory property tax rate. Compute the effective property tax rate. The Smiths family lives in Knightstown. Their property has an appraisal value of $42,000. What is their city property tax bill?
To calculate the statutory property tax rate, we need to use the formula:
Statutory Property Tax Rate = (Planned Budget - Non-property Tax Revenue) / (Taxable Appraised Value - Exemptions)
Given values:
Planned Budget = $3,500,000
Non-property Tax Revenue = $750,000
Taxable Appraised Value = ($142,000,000 + $78,000,000) = $220,000,000
Exemptions = $3,000,000
Plug the values into the formula:
Statutory Property Tax Rate = ($3,500,000 - $750,000) / ($220,000,000 - $3,000,000)
= $2,750,000 / $217,000,000
= 0.0127 or 1.27%
Therefore, the statutory property tax rate is 1.27%.
Now let's calculate the effective property tax rate. The effective property tax rate takes into account the assessment ratio. The assessment ratio of 50% means that only 50% of the appraised value is taxed.
Effective Property Tax Rate = Statutory Property Tax Rate * Assessment Ratio
Effective Property Tax Rate = 1.27% * 50%
= 0.635% or 0.00635
Therefore, the effective property tax rate is 0.635%.
To calculate the Smiths family's city property tax bill, we need to multiply the appraised value of their property by the effective property tax rate:
City Property Tax Bill = Appraised Value * Effective Property Tax Rate
Given values:
Appraised Value = $42,000
Effective Property Tax Rate = 0.00635
City Property Tax Bill = $42,000 * 0.00635
= $266.70
Therefore, the Smiths family's city property tax bill is $266.70.