 Hello and welcome to the session. In this session we will discuss about property tax and income tax. First of all we are going to discuss about property tax. Property tax is levied on property which a person owns like a house, an apartment, an office building, etc. Next we are going to discuss how to calculate property tax. The property taxes are calculated using mill levy and the assessed property value. Now we are going to discuss mill levy or millage tax. It is the tax rate levied on the property value 1 mill is equal to one-tenth of a cent or we can write it as 0.001 dollars. Tax rate is usually given in percentage and the method of determining the tax rate varies from place to place. This rate is decided by the taxing authority. Now we will see what is assessed value. The assessed value of the property is obtained by multiplying the market value of the property by the assessment rate. The taxing authority will first find the market value of the property and will also determine the assessment rate which is a uniform percentage and varies by tax jurisdiction. So we have this formula for calculating assessed value and it is given by assessment rate into market value. Now to derive actual property tax using tax rate assessed value is multiplied by tax rate. So we have property tax is equal to assessed value into tax rate. Now if tax rate is given in the form of mills per one dollar then property tax will be equal to assessed value into mills per one dollar upon thousand dollars. Let us consider the following example. If the market value of Sam's property is three hundred and forty five thousand dollars and assessment rate is fifteen percent then find Sam's property tax due if tax rate is six point two five percent. Let us start with its solution. Here market value is given as three hundred and forty five thousand dollars and assessment rate is given as fifteen percent. So first we find the assessed value which is given by assessment rate into market value. So here we have the assessment rate as fifteen percent. So we can write it as fifteen upon hundred into the market value which is given as three hundred and forty five thousand dollars. So this is equal to fifty one thousand seven hundred and fifty dollars. So the assessed value is fifty one thousand seven hundred and fifty dollars. Now tax rate is given as six point two five percent. So the property tax due will be given by assessed value into tax rate and this is given as fifty one thousand seven hundred and fifty dollars into six point two five percent. This can be written as fifty one thousand seven hundred and fifty dollars into six point two five upon hundred. On solving this we get three thousand two hundred and thirty four point three seven dollars. Now we are going to discuss about income tax. Income tax is the tax which is paid by a person on his earnings at the end of the year. Income tax is levied by the taxing authority. The taxing authority decides the amount of tax to be levied on the income. The income tax is paid only on the taxable income which is decided according to the norms set by the authority. People with different incomes pay different amount of income tax. Taxable income can be calculated by using this formula that is taxable income is given by adjusted gross income minus deductions minus exemptions. We should see that following are the components of income tax and these are gross income, adjusted gross income, standard deduction or itemized deduction and exemptions. Now we will discuss each of the components one by one. First we have gross income. It is the total income for the year which includes wages, salaries, bonus, interest, dividends, profit from a business etc. Next we have adjusted gross income and it is calculated as your gross income from taxable sources minus specific deductions such as unreimbursed business expenses, tuition and fee deductions, medical and health saving account contribution, alimony payment and deductible retirement plan contributions. Then we have standard deduction or itemized deduction. Reductions reduce the taxable income. There are two types of deduction. First is standard deduction and second is itemized deduction. We should note that the taxpayer can opt for only one type of deduction either standard or itemized. Now we will see what is standard deduction. It is based on the filing status. It describes the amount of income that is exempted from tax and it is decided by the taxing authority. Now we are going to discuss about itemized deduction. After computing their adjusted gross income, taxpayers can itemize their deductions from the list of allowable items and subtract those itemized deductions from their adjusted gross income amount to arrive at their taxable income amount. Medical expenses, state and local taxes paid, property tax, mortgage interest expenses, charitable contributions are some of the items which are deducted from adjusted gross income. And now we are going to discuss exemptions. It is the amount of income per person that is free from tax. A person can claim one exemption for himself, one for his spouse and one for each child. Thus we can find the taxable income using the following steps. Our first step is to calculate gross income or total income. Then we calculate the adjusted gross income. Then in the third step we calculate the itemized deduction or standard deduction and subtract it from adjusted gross income. And lastly we subtract exemptions from the amount calculated in the previous step. The obtained amount is the taxable income. Let us consider the following example. Lara works in a bank. Her gross income this year is $60,000. She made a contribution of $5,000 to her medical saving account. Her allowable deduction includes donation of $500 to Charitable Trust and Mortgage Interest expense of $3,000. Calculate her taxable income. Now to calculate her taxable income we will follow the following steps. Now Lara gross income is given as $60,000. We know that adjusted gross income is given by gross income minus specific deduction. Here she made a contribution of $5,000 to her medical saving account. So specific deduction is given by $5,000. Thus adjusted gross income will be equal to $60,000 minus $5,000 which is equal to $55,000. Now in the next step we calculate itemized deduction. Here her allowable deduction includes donation of $500 to Charitable Trust and Mortgage expense of $3,000. So total deduction will be equal to $500 plus $3,000 and this is equal to $3,500. Now we know that taxable income is given by adjusted gross income minus deduction. So here we have the adjusted gross income as $55,000 minus deduction amount which is $3,500. So this is equal to $51,500. Now we are given no information for exemption whether she is married or having a child. So exemptions are 0. Thus total taxable income is $51,500. Thus in this session we have discussed about property tax and income tax. This completes our session. Hope you enjoyed this session.