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What is Personal Property Tax?

September 7, 2022

Personal Property Tax: What It Is and Some Examples

Personal property tax is called “ad valorem” tax and is based on the value of the property. It must be paid every year.

The tax on personal property is different from the tax on “real” property, which is the tax on homes, buildings, and land. The main difference is that personal property includes things that can be moved, like cars, boats, tools, or furniture. Real property, on the other hand, only includes structures or things that can’t be moved. The IRS says that personal property tax is one of the four types of non-business taxes that can be deducted (IRS).

Personal property that is taxed and property that isn’t taxed may be defined a little differently in each state or city. In California, for example, taxable personal property must be something that can be touched, like portable equipment, tools, office supplies, and furniture, and so on. In some places, animals and other livestock may be considered personal property.

How It Works

Some states and cities also tax personal property that is not attached to the land, like cars, furniture, and boats. This is in addition to taxes on real property, which is the building and land. Personal property taxes are a way for state and local governments to get money.

Do I Need to Pay Personal Property Taxes?

Yes, you do if you live in a state or locality that taxes personal property. The good news is that even though each state and local government has its own rules and tax rates, everyone can deduct personal property taxes from their federal income tax if they itemize.

For you to be able to deduct personal property taxes, the only requirements are that the taxes you paid were based on the property’s value and that the tax was paid once a year.

What is the difference between real property tax and personal property tax?

Real property is anything you own that is attached to the land or can’t be moved. For tax purposes, this is usually real estate. Personal property is everything you own that you can move and take with you.

Is it considered a direct tax?

It is a direct tax because you pay it directly to the government when you file your income taxes each year. At some point in the process of buying property, there may be indirect taxes. However, these are taxes that can be paid by someone else, like the seller.

If you need help in preparing your individual income tax return, don’t hesitate to get in touch with us! Visit our website at https://fas-accountingsolutions.com/ or email us at admin@fas-accountingsolutions.com.