What is Personal Property Tax?

Personal property tax is any tax on personal property. Read more to find out what personal property entails and the varied tax rates for different kinds of personal property tax.

Taxes come in several different categories. First of all, there are federal taxes, state taxes, and local taxes. Then, amid these 3 categories of taxes, there are taxes on different kinds of things. For example, there are taxes on earned income, taxes on homeowners, sales tax, and more. But did you know that there is a specific tax on personal property? If you own certain types of personal property, like a car or a camper, then those items may be subject to what's called personal property tax.  

What is Personal Property Tax?

Personal property taxes can sometimes also be referred to as real estate taxes or property taxes. But sometimes personal property includes items that aren't technically real estate property. So the term personal property tax is a more broad term. It refers to any taxes posed on what the Internal Revenue Services (IRS) defines as personal property. 

When you think of the words "personal property" many things might come to mind. You might think of things like the clothes you own, your personal laptop, your home, or even any land you own. But when used as a tax term, personal property only means very specific items that you can own personally, and not anything at all that you might own. 

small wooden house on top of calculator

How do personal property taxes work? 

During tax season, at the beginning of each year, you'll file personal property taxes when you complete your state taxes. Your state or local government will have a specific tax form they'll want you to include for personal property taxes. This tax form will help you outline the personal property you have, its value, and the taxes you owe on them. After your state taxes are filed, the IRS will go over these numbers and send you a tax bill to pay the personal property taxes you owe. 

What is Considered Personal Property?

The definition of personal property, when it comes to taxes, includes any movable property that is not attached to a home or a building. In the tax world, personal property refers to any movable and unattached assets you might have. This can include movable assets that you own personally or that you own as a business. 

There are also 2 different kinds of personal property, there is tangible personal property and intangible personal property. 

What is tangible personal property?

Tangible personal property are assets that have physical mass and physically moveable. Below is a list of items that the IRS would consider tangible personal property.

  • Automobile or car 
  • Motorcycle 
  • Motor home 
  • Camper 
  • Boat 
  • Furniture 
  • Collectibles 
  • Machinery 
  • Equipment 
  • Tools 
  • Medical equipment 
  • Computer hardware 
motorcycle in a sunset

What is intangible personal property? 

Intangible personal property are assets that don't have physical mass. They are still something that an individual or business can own and use as a financial asset, but they don't have physical (or tangible) mass. Below are a few examples of what the IRS considers to be intangible personal property. 

  • Stocks 
  • Bonds 
  • Bank accounts 
  • Copyrights 
  • Patents 
  • Intellectual property 
  • Digital assets 

Another feature of intangible assets is that sometimes they don't have an exact financial value, or they have a financial value that fluctuates. This varying financial worth is another reason these 2 kinds of personal property have to be distinguished from each other in order property assess their tax obligation

Stocks going up and down

What are Real Estate Property Taxes?

Personal property tax and real estate property tax might seem similar because they both have to do with property, but it should be noted that they are not the same thing. There are different kinds of property, and each category of property has its own way of calculating taxes. 

Real estate taxes are property taxes on your home or other real estate properties. This tax doesn't involve other types of assets you might own like a car or a boat. Instead, real estate property taxes focus only on real estate property. 

Below is a list of the types of property the IRS considers when calculating real estate property taxes. 

  • Single family homes 
  • Condos 
  • Duplexes 
  • Townhomes 
  • Multifamily homes 
  • Apartment units 
  • Commercial buildings and structures 
  • Land 

How do real estate property taxes work? 

Real estate property taxes are paid annually. Real estate owners can receive a tax bill after filing taxes at the beginning of each year. Homeowners with mortgages might have these real estate taxes included in their monthly mortgage payments throughout the year. 

How much you pay in real estate taxes depends on several factors like where you live and the fair market value of your home. This fair market value of your home is what the IRS uses to determine the current value of your home. This amount then determines how much you owe in real estate property taxes. The tax rate percentage used on this number is determined by the state and local governments near you. 

home with keys and coins in front of it

Real Estate Tax vs Property Tax

Real estate tax and property tax are not the same thing, though they do both have to do with property. The primary difference between real estate tax vs property tax is the kind of property they deal with. 

Real estate tax deals with taxes on real estate properties. These types of properties include homes, rentals, land, commercial buildings, etc. 

Property tax deals with taxes on personal property. These types of properties include moveable assets like cars, campers, boats, etc.

In a way, real estate tax deals with taxes on immoveable property, while personal property tax deals with taxes on moveable property. 

When are Property Taxes Due?

Tax filing season is between January and April each year. You have this amount of time to file your federal and state taxes before filed taxes are due. Usually, the tax deadline for filing federal and state taxes is mid-April. 

After you file taxes the IRS will receive all your tax forms and input them into their system. Once they are done going over your filed taxes they will send things like tax refunds and tax bills. If you filed accurately and have property taxes to pay, what you owe will be on this tax bill from the IRS. Generally you have until November 30th to pay your property tax bill. 

In Conclusion,

Everyone has different levels of property and financial assets to consider when filing taxes. You might rent an apartment and only need to pay property tax on your car. Or you might have a home and a rental property you own that you need to add to your taxes each year. Regardless of your tax situation, tax professionals like Check City can help you file all your federal and state taxes, so you don't miss anything.