A commercial office building in Birmingham has a fair market value of $500,000. The local millage rate is 40 mills. Using Alabama's classified property tax system, what is the annual ad valorem tax owed on this property?
Correct Answer
D) $4,000
Step 1 — Identify the property class: A commercial office building is Class II property, assessed at 20% of fair market value. Step 2 — Calculate assessed value: $500,000 × 20% = $100,000. Step 3 — Convert millage rate: 40 mills = 40 ÷ 1,000 = 0.040. Step 4 — Calculate tax: $100,000 × 0.040 = $4,000. The annual ad valorem tax is $4,000.
Why This Is the Correct Answer
Step 1 — Identify the property class: A commercial office building is Class II property, assessed at 20% of fair market value. Step 2 — Calculate assessed value: $500,000 × 20% = $100,000. Step 3 — Convert millage rate: 40 mills = 40 ÷ 1,000 = 0.040. Step 4 — Calculate tax: $100,000 × 0.040 = $4,000. The annual ad valorem tax is $4,000.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Various programs and exemptions exist to reduce the property tax burden for specific groups, such as seniors, homesteaders, or veterans.
A transfer tax is a tax imposed on the transfer of ownership of real estate.
Reconciliation is the final step in the appraisal process where the appraiser analyzes the value indications from all applicable approaches and arrives at a single final opinion of value. It is not a simple average of the three values.
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Margaret owns a home in Tuscaloosa that she uses as her primary residence. She has applied for and received the standard Alabama homestead exemption. Under Alabama law, what is the maximum homestead exemption amount available to Margaret as an individual homeowner?
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