Most people are already aware of the fact that they have to pay some kind of property tax on the real estate that they own. This real estate could include a house, a building, or even a plot of land. However, do you know that you also have to pay tax on your personal property? Depending on the state that you currently live in, you may be required to pay personal property taxes on items such as your new car, boat, or dog. These taxes are typically assessed by working out the percentage of the complete value for an item. They might fall under state or county taxes according to the area in which you live. Not all states agree with the concept of taxing personal property, and what is considered to be applicable to personal property taxes can vary from one state to the next.
What Are Personal Property Taxes?
In certain states, personal property taxes apply generally to household items such as your vehicle. When you're buying an item like this, it's a good idea to keep these taxes in mind as part of your complete cost. Generally, costly new cars can have the highest amount of taxes, because the amount is calculated using a percentage of the item's worth.
In other states, personal property taxes only apply to businesses and their property. In these states, personal property is considered to be anything that might be removed from that building without causing damage to it. For example, you can't take out the walls of your business, but you could remove the furniture or computers that are used within.
If you were to live on a farm, the land that you own would also be taxed according to real estate property laws, and if you are in a state that uses personal property taxes, you may also be required to pay taxes for your livestock and farming equipment.
How Personal Property Taxes Fluctuate
Taxes for personal property don't change as often a real estate taxes do. In general, real estate taxes will be based on a percentage of your property's market value, and market value can depend largely on your residential area. If all of your neighbors decide to add renovations to their homes, then the value of your property will increase, and so will your property tax – even if you didn't renovate yourself. Personal property tax works differently, however. Even if your neighbors buy the same car, your tax rate on your vehicle won't change.
Rates can be altered according to depreciation, and age can make the items that you buy less valuable. However, sometimes, even examples of the same property can be taxed in different ways. Personal property tax doesn't generally differ much within a particular state, but it can be a good idea to check out the tax laws if you are moving home. What is considered to be taxable may change as you move across state borders, and you may even find that you are relocating to a place that doesn't use personal property taxes at all. Some states are currently in the process of removing the personal property tax.