Jean-Paul owns a home in St. Tammany Parish appraised at $450,000. He has the homestead exemption in place. His neighbor, Renee, owns a rental duplex next door appraised at $200,000. Both properties are in the same taxing district with a millage rate of 100 mills, and residential properties are assessed at 10% of fair market value. Which of the following correctly compares their annual property tax obligations?
Correct Answer
A) Jean-Paul pays $3,750 and Renee pays $2,000, because the homestead exemption reduces Jean-Paul's taxable assessed value
Jean-Paul's calculation: Assessed value = $450,000 × 10% = $45,000. Apply homestead exemption: The exemption covers $75,000 of fair market value, which equals $7,500 of assessed value ($75,000 × 10%). Taxable assessed value = $45,000 − $7,500 = $37,500. Tax = $37,500 × (100 ÷ 1,000) = $37,500 × 0.10 = $3,750. Renee's calculation: Assessed value = $200,000 × 10% = $20,000. No homestead exemption (rental property). Tax = $20,000 × 0.10 = $2,000. The homestead exemption applies to owner-occupied primary residences only, not rental properties. Both properties use the same 10% residential assessment ratio. Option A correctly states both amounts.
Why This Is the Correct Answer
Why the Other Options Are Wrong
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Background Knowledge for Valuation
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
The comparable sales approach estimates a property's value by comparing it to similar properties that have recently sold in the same market area. It is the most widely used and reliable approach for appraising residential properties.
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