Personal property taxes are taxes imposed based on the value of personal property that is “movable.” For example, personal property can include automobiles, RVs, boats, mobile homes, office equipment, or machinery. Each jurisdiction has its own rules regarding personal property taxes, and some places, including New York state, don’t charge it at all.
If you live in a state or locality that imposes personal property taxes, or if you plan to move to one, you should understand what personal property tax is and how it works.
Definition and Examples of Personal Property Tax
Personal property taxes are based on the value of owned property (referred to as an “ad valorem” tax), and must be imposed annually.
Personal property tax is different from “real” property (or real estate) tax that applies to homes, buildings, or land. The main distinction is that personal property refers to movable property or assets like vehicles, boats, equipment, or furnishings; whereas real property only includes fixed or immovable structures or property.
- Alternate definition: Personal property tax is one of the four types of deductible nonbusiness taxes, per the Internal Revenue Service (IRS).
- Alternate name: Ad valorem tax, which refers to a tax that’s assessed based on an item’s value. Personal property taxes are an example of an ad valorem tax.
- Acronym: PPT
Each state or locality may have a slightly different definition of what constitutes taxable personal property and what items are exempt. For example, in California, taxable personal property must be tangible, and can include items such as portable equipment, tools, office items and furniture, and the like. Some places may include animals or livestock as personal property.
How Personal Property Tax Works
In addition to real property tax (building and land property), some states or jurisdictions also tax personal property that is not attached to the land, like vehicles, furnishings, boats, etc. State and local governments impose a personal property tax to generate revenue.
Each state and/or local government will have its own rules and definitions when it comes to personal property taxes.
To give you an example, this is how it works for residents of Oregon, as per the Oregon Department of Revenue. Personal property is valued at 100% of its real market value. Anyone who has taxable personal property has to file a return by March 15. You will then receive by mail a property tax statement in late October. The taxpayer is obligated to pay at least one-third of that tax bill by November 15 to avoid interest charges. If you pay in full by that point, you’ll get a 3% discount on the bill. If not, the remaining payments are due February 15 and May 15. Outstanding balances will turn into a lien on all personal property by July 1.
Do I Need To Pay Personal Property Taxes?
If you reside in a state or locality that imposes personal property taxes, then yes, you do.
The good news is that although each state and local government has its own rules and tax rates, everyone is entitled to claim a deduction for personal property taxes on their federal income tax, if they itemize.
The only requirements for deducting personal property taxes is that the taxes you paid must be based on the property value, and it must be imposed on an annual basis.
Since the Tax Cuts and Jobs Act raised the standard deduction significantly, it may not make sense to itemize unless the sum of your itemized deductions is higher than the standard deduction amount.
- Depending on where you live, you may have to pay personal property tax.
- Personal property tax refers to property that is movable, such as cars, boats, or equipment.
- Each state or local government has its own rules regarding what counts as personal property, and how the taxes owed are calculated and collected.
- If you itemize, you could claim a deduction on your federal tax return for personal property taxes you pay.