Here’s what to know about records to hang on to and how long you should keep them.
What are personal property taxes?
Personal property taxes, also known as property taxes, are a form of taxation on what is termed personal property. Personal property is defined as any movable property that is not attached to a home or building. The requirements for personal property tax vary from state to state and mostly affect businesses. In a business, all movable assets are termed personal property and are taxed annually. Additionally, some states tax personal property such as motor vehicles, boats and aircraft. Personal property excludes real property, which comprises of real estate, land and buildings.
Historically, all property was taxed as a means of raising money to fund local authorities, although these requirements gradually have been eased over time. For the individual, the most obvious form of this tax is that which is levied on real estate as well as the tax levied in some states on valuable movable property such as vehicles. The tax payable is based on a percentage of the assessed value of the property.
Businesses are most affected by personal property taxes, because all equipment that does not form part of immovable property and which is used in a business is considered personal property. This means that companies need to keep detailed records of all personal property, including the purchase price and its annual depreciation. Personal property can be tangible, that is physical and can be felt and touched, or intangible, such as securities, patents and copyrights.
Personal property is taxed locally and, provided the tax is based on the value of the property, it can be deducted from federal taxes.
Personal property tax examples
An example of a personal property tax are the taxes levied in Arlington County, Virginia, on all motor vehicles that are normally housed overnight in that county. If you live in Arlington and have a car, motor home or a boat stored in that county, you have to pay an annual property tax. However, if you live in another county but work in Arlington, and your vehicle is stored outside the county overnight, you don’t have to pay the tax.
On the other hand, if you run a business in Arlington, then all movable assets owned by that business are subject to personal property taxes.
Do you know how personal property is taxed in your state? Find out by consulting our state tax rates.