What Is Personal Property Tax?

by Team eLocal
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If you own valuable personal items or business assets, you may have to pay personal property tax on their value.

Understanding how personal property tax works can help you plan your finances and prevent nasty tax-related surprises.

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What Is Personal Property Tax?

Personal property tax is a tax levied on valuable personal items. Each state or local government imposes personal property taxes differently, so it's essential to check the rules where you live to understand what you owe.

Personal property tax differs from real estate tax because it only applies to movable assets. In other words, it doesn't apply to items attached to a house or business property. Businesses are usually more affected by personal property taxes than individuals because they typically hold larger volumes of movable assets.

Most states and local governments charge personal property taxes annually, although some impose taxes at the point of sale. The tax is calculated as a percentage of the property's value, which means any depreciation or increase in value over time can affect how much personal property tax you pay.

Percentage rates for personal property tax differ by area. Some states and local governments charge a flat rate, regardless of the asset type. Others may charge different personal property tax rates for different assets.

Some jurisdictions require individuals and businesses to register specific property types with the local tax assessor's office. Generally, you'll need to provide a list of any taxable assets with details about their age, model and value. Deadlines vary, so contact your local office to determine when to file.

What Types of Assets Are Subject to Personal Property Tax?

What counts as taxable personal property depends on where you usually keep the asset, and many areas exempt property worth less than a specific value. Alternatively, your business may only become liable for personal property tax when the collective value of your business assets exceeds a certain amount. You can find out whether your property is liable for personal property tax on your local tax assessor's office website.

A common misconception about personal property tax is that it only applies to tangible assets, such as vehicles. However, it may also apply to intangible assets, such as patents and copyrights. Examples of items commonly subject to personal property tax include:

  • Cars
  • Boats
  • Portable machinery and equipment
  • Cell phones
  • Furniture
  • Computers and tablets
  • Business supplies

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