A homestead in Carmel, Indiana has a gross assessed value of $300,000. After applying the Homestead Standard Deduction of $48,000, the net assessed value is $252,000. The local tax rate is $2.00 per $100 of net assessed value. However, the homeowner's tax bill is subject to Indiana's Circuit Breaker cap. What is the homeowner's actual property tax liability after applying the Circuit Breaker?
Correct Answer
A) $3,000
Step 1: Calculate the tax before the Circuit Breaker. Net assessed value = $252,000. Tax rate = $2.00 per $100. Tax = ($252,000 ÷ $100) × $2.00 = 2,520 × $2.00 = $5,040. Step 2: Apply the Circuit Breaker cap for homesteads. The cap is 1% of GROSS assessed value = $300,000 × 1% = $3,000. Step 3: Compare. The calculated tax of $5,040 exceeds the Circuit Breaker cap of $3,000. Therefore, the homeowner pays only $3,000 — the Circuit Breaker limits the tax to $3,000.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Homestead portability allows homeowners to transfer a portion of their accumulated homestead tax savings to a new homestead in the same state.
The income approach estimates a property's value based on the income it generates by converting net operating income into a value estimate using a capitalization rate. It is the preferred method for income-producing properties.
Many states have laws to limit how much property taxes can increase each year, regardless of market value fluctuations.
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