Personal Property Tax Definition

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Personal Property Tax Definition

A personal property tax is a tax levied by state or local governments on certain types of assets owned by their residents. Generally, personal property means assets other than land or permanent structures, such as houses, which are considered real property. Personal property taxes are typically used to fund public works projects, such as road maintenance or the construction of schools.

Key Takeaways

  • Personal property taxes are a form of tax levied by many state and local governments.
  • In general, personal property refers to expensive objects such as automobiles and yachts, as opposed to real estate, which is called real property.
  • Personal property taxes are often used to support public works projects such as schools and roads in states and municipalities that have them.
  • The types of property that are taxed and the rates at which they are taxed vary by location.

How Personal Property Taxes Work

States and local governments with personal property taxes can apply them differently, in terms of:

  • Which categories of property are taxed?
  • How the tax is calculated
  • What are the proceeds from personal property taxes used for?

In North Carolina, for example, property tax is assessed locally and collected by individual counties. The North Carolina Department of Revenue, which collects sales and income tax, plays no part in the collection or management of personal property taxes.

North Carolina residents are subject to taxes on both real property and tangible personal property, divided into three categories:

  • Real property
  • Personal property
  • Motor vehicles

Other states, such as New York, only tax real property, like land and buildings, although they and their local governments may collect sales tax on personal property at the time it is purchased. In the case of personal property like automobiles and motorcycles, states also collect revenue in the form of registration and licensing fees.

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Tip

If you disagree with a personal property tax assessment, you should be able to appeal it with your local tax office. Look for details on their website.

Examples of Personal Property Tax

Because state and local and governments define personal property differently, what’s considered personal property in one state may not fall under that same umbrella in another. As mentioned, not every state taxes personal property at all. And many that do tax it provide exemptions for personal property that is worth less than a certain amount.

Personal property may also contain commercial assets. Typical instances include:

  • Machinery
  • Equipment
  • Furniture
  • Photocopiers
  • Computers
  • Telephones
  • Supplies

How Personal Property Taxes Are Calculated

Personal property tax is normally determined based on the value of the property in issue and imposed as a percentage of that value. Ad valorem taxes are property taxes that are levied depending on the value of the property.

Tax assessors calculate the value of personal property in a variety of methods. In Missouri, for example, the City of St. Louis bases automobile valuations on the National Automobile Dealers Association’s average trade-in value for that make, model, and year.

The tax rate and how it is administered will also differ depending on the state and municipality. Some states, for example, levy a flat tax on all property kinds, including real estate, personal property, and automobiles. Others charge varying prices for certain types of property. Many counties or other local governments are free to establish their own rates, however the state may impose limitations.

The base property tax rate in California, for example, is 1%. This applies to both personal property and real property held by people or companies. However, counties in California may add fees or other charges to their personal property tax assessments.

  Effective Tax Rate Definition

Your local tax assessor’s office (or its website) should be able to provide information on your personal property tax rate (if any) and what categories of property are included.

Note

Personal property tax rates are revised on a regular basis, and property values are appraised, so your tax amount may increase or decrease from year to year.

How to File and Pay Personal Property Tax

Personal property tax is typically owed yearly and assessed on January 1 of each year. Individuals or corporations that owe the tax are subsequently sent bills.

Certain categories of personal property may need registration with your local tax office when purchased. This usually entails filling out a form, either online or in person at the tax assessor’s office, with information on the property.

The necessity to submit this kind of document might vary depending on where you reside and the value of your property. Filing a business property statement form identifying business personal property is only necessary in Orange County, California, where the total worth of the property is $100,000 or more. So, if you own a company but your equipment is worth less than $100,000, you don’t need to file.

Each year, there may be a deadline for submitting this form. Again, using Orange County as an example, the deadline is April 1. Businesses, on the other hand, may request an extension if they need additional time.

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