The buyer gets a $280,000 mortgage in Florida. The intangible tax is:
Correct Answer
B) $560
$280,000 × 0.002 (2 mills) = $560.
Why This Is the Correct Answer
B is correct because Florida's intangible tax rate is 0.2% (2 mills) on new mortgages. $280,000 × 0.002 = $560, which is the correct calculation for this tax.
Why the Other Options Are Wrong
Option A: $280
A is incorrect because it represents only half of the correct calculation ($280,000 × 0.001). This error might occur if you mistakenly use 1 mill instead of the correct 2-mill rate.
Option C: $840
C is incorrect because it represents three times the correct amount ($280,000 × 0.003). This error might occur if you mistakenly apply a 3-mill rate instead of the correct 2-mill rate.
Option D: $980
D is incorrect because it represents 3.5 mills ($280,000 × 0.0035). This error might occur if you confuse intangible tax with other Florida real estate taxes or apply an incorrect rate.
Deep Analysis of This Real Estate Math Question
The intangible tax calculation is a fundamental skill for real estate professionals in Florida, as it affects closing costs for buyers and impacts transaction transparency. This question tests your ability to apply Florida's specific intangible tax rate to a mortgage amount. The core concept involves understanding that Florida imposes a 2-mill (0.2%) tax on new mortgages, which is calculated by multiplying the mortgage amount by 0.002. The challenge here is recognizing this specific tax rate and applying it correctly. Many students confuse this with other Florida real estate taxes like documentary stamp tax, which has different rates. Understanding intangible tax is crucial for accurate closing estimates, client counseling, and ensuring proper compliance in real estate transactions.
Background Knowledge for Real Estate Math
Florida imposes an intangible tax on certain financial instruments, including new mortgages. This tax was established to generate state revenue and has been a consistent part of Florida real estate transactions for decades. The intangible tax rate is currently set at 0.2% (2 mills) on the amount of new mortgages, paid by the borrower at closing. It's important to distinguish this from documentary stamp tax, which is paid on deeds and promissory notes at different rates. Understanding these specific Florida tax requirements is essential for proper closing cost estimation and compliance.
Memory Technique
visualPicture a '2' stamp on every $1,000 of mortgage amount
When calculating intangible tax, visualize a '2' stamp on each $1,000 block of the mortgage amount to remember the 2-mill rate
Exam Tip for Real Estate Math
For intangible tax questions in Florida, remember it's always 0.2% (2 mills) on the mortgage amount. Multiply the loan amount by 0.002 for quick calculation.
Real World Application in Real Estate Math
As a Florida real estate agent, you're working with first-time home buyers who are concerned about closing costs. They've received a $280,000 mortgage and need to know their intangible tax liability. You calculate $560 using the 0.2% rate and explain this is a required Florida tax that will appear on their closing statement. This helps them budget properly and demonstrates your expertise, building trust as they navigate their first home purchase.
Common Mistakes to Avoid on Real Estate Math Questions
- •Confusing intangible tax with documentary stamp tax rates
- •Using the wrong percentage (e.g., 0.2% instead of 0.002 or vice versa)
- •Misapplying the tax to the sales price instead of the mortgage amount
Related Topics & Key Terms
Related Topics:
Key Terms:
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