How are property taxes typically calculated?

Property taxes are primarily calculated based on the assessed value of the property in conjunction with the local tax rate set by the municipality or taxing authority. The assessed value is determined through an evaluation process that considers various factors, such as the condition of the property, its size, its location, and comparable property values in the area.

Once the property is assessed, the local tax rate is applied to that assessed value to determine the amount owed in property taxes. This means that as property values fluctuate due to market changes or improvements made to the property, the assessed value can also change, subsequently affecting the property taxes owed. Thus, the combination of assessed value and local tax rate is the fundamental basis for calculating property taxes, making this answer the most accurate in representing how property taxes are determined.

The other options offer alternative scenarios but do not accurately capture the primary method used for tax calculation. For instance, using a property's original purchase price does not account for changes in market conditions or assessments, while market trends may influence assessed values, they do not directly drive the calculation. Lastly, tax exemptions and deductions might adjust the final tax owed but do not factor into how the property tax is initially calculated.