A residential property in Sioux Falls, South Dakota has an assessed value of $240,000. The local mill levy is 15 mills. The owner qualifies for the owner-occupied classification, which applies a 100% assessment ratio (full assessed value is used). South Dakota has no real estate transfer tax. What is the owner's annual property tax bill?
Correct Answer
D) $3,600
The formula for calculating property tax is: Assessed Value × Mill Levy ÷ 1,000 = Annual Property Tax. With an assessed value of $240,000 and a mill levy of 15 mills: $240,000 × 15 ÷ 1,000 = $240,000 × 0.015 = $3,600. South Dakota has no real estate transfer tax, so no transfer tax is added to this calculation. The owner-occupied classification uses the full assessed value (100% ratio), so no adjustment is needed.
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Related Concepts
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.
The cost approach estimates a property's value by calculating the current cost to rebuild the improvements, subtracting accumulated depreciation, and adding the land value. It is most reliable for new construction and special-purpose properties.
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.
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