Level 4 Chapter 1

Ad Valorem Taxes

Taxes based on the value of property

Ad Valorem Meaning

According to value

Assessed Value

The value assigned to property for taxation purposes

Assessment

The process of determining a property's taxable value

Mill

One dollar of tax per one thousand dollars of assessed value

Property Tax Formula

Assessed Value divided by 1000 multiplied by Mill Rate

Tax District

A geographic area with authority to levy property taxes

Tax Base

The total taxable value of all property within a taxing jurisdiction

North Carolina Machinery Act

The North Carolina law governing property taxation procedures

Tax Rate

The amount of tax charged per unit of assessed value

Property Tax Purpose

To fund local government services such as schools roads and public services

Local Property Taxes

Generally fund local rather than federal government services

Tax Calculation

Assessed Value multiplied by Tax Rate equals Property Tax Amount

Mill Rate

The number of dollars taxed per one thousand dollars of assessed value

Taxable Value

The assessed value used to calculate property taxes

Property Tax Characteristics

Property taxes are ad valorem and vary according to value

Taxing Authorities

May include counties municipalities and school districts

Property Tax Example

$400000 assessed value at 12 mills equals $4800 annual tax

Property Tax Example

$250000 assessed value at 16 mills equals $4000 annual tax

Property Tax Example

$125000 assessed value at 8 mills equals $1000 annual tax

Property Tax Increase

Caused by higher assessed values higher mill rates or both

Tax Base Definition

The total assessed value of taxable property in a district

Property Tax Example

$90000 assessed value at 15 mills equals $1350 annual tax

Property Tax Example

$500000 assessed value at 18 mills equals $9000 annual tax

Assessed Value Increase If Mill Rate Stays Same

Property taxes increase proportionally

Mill Rate Increase If Value Stays Same

Property taxes increase proportionally

Estimating Property Taxes

Requires assessed value and tax rate

Property Tax Example

$175000 assessed value at 20 mills equals $3500 annual tax

Property Tax Example

$220000 assessed value at 5 mills equals $1100 annual tax

Property Tax Example

$750000 assessed value at 14 mills equals $10500 annual tax

Property Taxes

Generally classified as ad valorem taxes

Assessment Purpose

To determine value for taxation purposes

Property Tax Example

$80000 assessed value with $800 tax bill equals a 10 mill rate

Property Tax Example

$600000 assessed value at 10 mills equals $6000 annual tax

Mill Rates

Higher mill rates result in higher property taxes

Property Tax Example

$350000 assessed value at 25 mills equals $8750 annual tax

North Carolina Machinery Act Purpose

Establishes procedures for property taxation in North Carolina

Property Tax Example

$110000 assessed value at 30 mills equals $3300 annual tax

Property Tax Bill

Based on assessed value and tax rate

Property Tax Example

$425000 assessed value at 10 mills equals $4250 annual tax

Ad Valorem Definition

According to value

Property Tax Example

$275000 assessed value at 12 mills equals $3300 annual tax

Property Tax Example

$950000 assessed value at 8 mills equals $7600 annual tax

Assessment Goal

To determine taxable value

Property Tax Example

$180000 assessed value at 22 mills equals $3960 annual tax

Assessed Value Increase by 10 Percent with Same Tax Rate

Taxes increase approximately 10 percent

NC Exam Tax Shortcut

Divide assessed value by 1000 then multiply by mill rate

Mill Rate Conversion

10 mills equals 1 percent tax rate

Mill Rate Conversion

20 mills equals 2 percent tax rate

Property Tax Example

$200000 assessed value at 10 mills equals $2000 annual tax

Property Tax Example

$300000 assessed value at 15 mills equals $4500 annual tax

Property Tax Example

$100000 assessed value at 25 mills equals $2500 annual tax

Property Tax Example

$150000 assessed value with $1500 tax bill equals a 10 mill rate

Tax Calculation Shortcut

Move three decimal places left from assessed value then multiply by mills

Property Tax Priority

Property taxes are an important source of local government revenue

Taxpayer Estimate Formula

Assessed Value ÷ 1000 × Mill Rate = Annual Property Tax

Most Tested NC Tax Concept

Property taxes are ad valorem taxes based on assessed value and calculated using mill rate