Personal Property tax is a local government tax for real property that applies to real estate property and tangible property that varies from state to state.
Taxes come in several different categories. There are federal taxes, state taxes, and local taxes. Then, amid these 3 categories of taxes, there are taxes on different kinds of things.
If you own certain types of personal property, like a car or a camper, then those items may be subject to this type of tax.
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What is Personal Property Tax?
Personal property tax is the tax the IRS applies to personal property. The IRS defines personal property in this instance as property that is movable and not attached to a home or building.
Instead, there is a distinction between property tax and real estate tax, and what is considered to be personal property vs real estate in the tax world.
When you think of the words "personal property" many things might come to mind. But when used as a tax term, personal property only means very specific items that you can own personally, and not just anything you might own.
What is Considered Personal Property?
When it comes to taxes, the definition of personal property includes any movable property that is not attached to a home or a building.
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:
- tangible personal property
- intangible personal property
What is Tangible Personal Property?
Tangible personal property includes assets that have physical mass and are physically moveable.
Below is a list of items that the IRS would consider tangible personal property and would be subject to property tax:
Tangible Personal Property Examples:
- Motorized vehicle
- Automobile or car
- Motor home
- Mobile home
- Medical equipment
- Computer hardware
What is Intangible Personal Property?
Intangible personal property includes 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 and would be subject to this type of tax:
Intangible Personal Property Examples:
- Bank accounts
- 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 to properly assess their tax obligation.
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 local or state taxes.
Your state or local government will have a specific tax form for you to use.
This tax form will help you outline the personal property you have, its value, and the taxes you owe.
- Tax filers fill out the paper or online form.
- A tax assessor evaluates the value of the personal property based on factors like its age, condition, and market value.
- A tax rate is applied to the personal property's estimated value. This rate is usually set by the state or local government. For example, if the personal property's value is $10,000 and the property tax rate is 1%, then the personal property tax would be $100.
- The tax filer and personal property owner makes online payments or sends payments through the mail.
What happens if you don’t pay your personal property taxes in time? If this occurs, the property owner may receive penalties, fees, and interest charges.
This means the property owner will end up paying more by paying late, then they would have if they paid on time.
If this late payment period goes on for too long, there is also a chance the property will be seized and sold to pay the overdue taxes.
What are Real Estate Taxes?
Real estate tax is the tax the IRS applies to real estate property. The IRS defines real estate property in this instance as land and any permanent structures on that land.
Real estate taxes are usually collected through local or state taxes and go through a similar process as personal property taxes.
Below is a list of the types of property the IRS considers when calculating real estate property taxes:
Real Estate Property Tax Examples:
- Single family homes
- Multifamily homes
- Apartment units
- Commercial buildings and structures
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 property. These include immovable types of properties like homes, rentals, land, commercial buildings, etc.
Property tax deals with taxes on personal property. These includes movable types of properties like cars, campers, boats, etc.
When are Property Taxes Due?
Personal property tax is generally due annually or semi-annually, depending on the due dates set by the state or local governments. This tax can sometimes be paid in one lump sum or in installments payments.
Tax filing season is between January and April each year. You have this amount of time to file your federal, state, and local government taxes before the tax day in 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.