Personal Property Taxes

What Are Personal Property Taxes?

Personal property taxes are taxes levied by a state or federal government on people’s valuable possessions such as cars, furniture, etc.

Deeper Definition

A personal property tax is levied on a person’s property that is not permanently affixed to land: e.g., equipment, furniture, vehicles, and computers. Generally, It includes any valuables, except real estate.

States that levy personal property tax has various laws that stipulate what kinds of property are taxed and at what rates. Usually, such laws answer the following questions:

• What kind of personal property are taxed? 

• How does the state calculate the taxes?

• What does the state do with the taxes?

A state evaluates personal property taxes broadly by the value of the property in question. A percentage of the property’s value is then charged to the owner as tax. Tax percentages vary by state and kind of property. For instance, a state may impose a flat tax rate of 2% as property tax. If a person buys an automobile worth $40,000, their property tax is $800.

These taxes are not limited to individuals alone; businesses pay this tax too. By law, the equipment a company uses for its operations is its personal property. 

What qualifies as taxable personal property varies from state to state. What is subject to a personal property tax in one locality may not be subject to taxes in another. Usually, each state has a specific valuation a possession must meet to qualify for taxation. For instance, a state may impose tariffs on only personal properties that cost $10,000 and above.

Examples of personal properties that may be taxed include:

• Automobiles
• Computers
• Furniture
• Appliances
• Equipment

If you reside in a state that collects personal property taxes, check with the local tax authority office or online resource for specific information on what is subject to taxes in the state.

Personal Property Tax Example

Jane buys a car for $50,000 and a boat for $100,000. In her state, the personal property tax rate is 1% annually. Jane must declare this property, as both the car and boat are stored overnight in this state. She will pay $1500 in the first year. Jane must declare the value of these items each year considering their devaluation.