A property is assessed at $250,000. The tax rate is $2.50 per $100. What is the annual tax?
Audio Lesson
Duration: 2:50
Question & Answer
Review the question and all answer choices
$5,000
$6,250
$7,500
$2,500
Why is this correct?
$250,000 ÷ $100 = 2,500. $2,500 × $2.50 = $6,250.
Podcast Transcript
Full conversation between instructor and student
Instructor
Hey there, welcome back to our real estate license exam prep podcast. Today, we're diving into a medium difficulty math question that's crucial for understanding property taxes. What's the topic you have in mind?
Student
Oh, it's about calculating annual property taxes based on the assessed value and tax rate. I've been working on that a lot, but it can get a bit tricky.
Instructor
Exactly! It's important because property taxes are a significant factor in real estate transactions. Let's take a look at the question. A property is assessed at $250,000, and the tax rate is $2.50 per $100. The question asks for the annual tax. Do you see the challenge here?
Student
Yeah, I see it. It's a bit confusing with the tax rate being per $100. Shouldn't it be a percentage?
Instructor
Great observation! The tax rate is indeed per $100, which means we need to apply a two-step process. First, we divide the assessed value by 100 to find out how many $100 increments there are in $250,000. So, $250,000 divided by 100 is...
Student
2,500 increments!
Instructor
Correct! Now, the next step is to multiply those increments by the tax rate of $2.50. So, 2,500 increments times $2.50 equals...
Student
$6,250!
Instructor
Exactly! That's why the correct answer is B, $6,250. It's a good reminder that when you see a tax rate per $100, you always need to divide the assessed value by 100 first before applying the rate.
Student
Oh, I see! So, people might get confused and just multiply the assessed value by the tax rate without doing the division first, which is why options like A and C are wrong.
Instructor
Absolutely, and option D is also incorrect because it only completes the first step of the calculation. It's a common mistake to think you can skip steps, but every calculation in real estate math has a specific process.
Student
Got it. So, what's the memory technique you mentioned?
Instructor
We use the acronym DIME. It stands for Divide by 100, Increment count, Multiply by rate, and Equals tax. It's a quick reminder of the two-step process. Remember DIME, and you'll be good to go!
Student
That's a fantastic tip! I'll definitely keep that in mind. Thanks for explaining this, it helps a lot.
Instructor
You're welcome! And remember, for tax rate questions, always check if the rate is expressed per $100 or as a percentage. And don't forget to follow the DIME process. Keep practicing, and you'll get the hang of it in no time. Keep up the great work!
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