An Arkansas real estate agent tells her client that the property tax on a $400,000 home will be calculated by multiplying the full $400,000 market value by the local millage rate. A competing agent tells the same client that Arkansas first converts market value to an assessed value before applying the millage rate, resulting in a much lower tax base. The client asks which agent is correct and what the assessed value would be. Which of the following responses is accurate?
Correct Answer
C) The second agent is correct; Arkansas assesses at 20% of market value, so the assessed value is $80,000.
The second agent is correct. Arkansas law (Ark. Code Ann. § 26-26-101 et seq.) uniformly requires that real property be assessed at 20% of its true market value statewide. For a $400,000 home: $400,000 × 20% = $80,000 assessed value. The local millage rate is then applied to the $80,000 assessed value, not the full $400,000 market value. This is a statewide statutory requirement, not a matter of county discretion.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Depreciation is an accounting method of allocating the cost of an asset over its useful life, allowing investors to deduct a portion of the asset's cost each year.
Highest and best use is an appraisal concept that identifies the most profitable, legally permitted, physically possible, and financially feasible use of a property. It is the foundation of all property valuation.
Homestead portability allows homeowners to transfer a portion of their accumulated homestead tax savings to a new homestead in the same state.
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Previous Question
Patricia owns a 100-acre farm in rural Benton County, Arkansas, where she has lived for 20 years. A bank obtains a judgment against Patricia for an unpaid business loan and attempts to force the sale of the entire 100-acre property to satisfy the debt. Patricia claims the Arkansas homestead exemption. Which of the following best describes the legal outcome?
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Cap rate: