PSI Virginia Real Estate Practice Exam

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What type of tax is levied as a special assessment?

Federal tax on property
An additional local tax for specific projects
State tax on capital gains
Annual income tax

The correct answer is: An additional local tax for specific projects

A special assessment is a tax that local governments impose on property owners to fund specific public projects that will benefit those properties. This type of tax is usually levied for improvements like street repairs, sidewalk installations, or sewer system upgrades, where the property owners in the vicinity of the improvements directly benefit from the enhancements. By charging a special assessment, the local government can allocate costs specifically to those who will see the advantage of the investment, rather than spreading the financial burden across a broader tax base. In contrast, federal taxes on property are broader and not tied to specific local projects, while state taxes on capital gains concern profits made from asset sales rather than property infrastructure. Annual income tax is based on individual earnings and is unrelated to property assessments. Thus, the local specificity and project-directed nature of a special assessment distinguishes it clearly from the other types of taxes listed.