A personal property tax is a tax levied by state or local governments on certain types of assets owned by their residents. Generally, personal property means assets other than land or permanent structures, such as houses, which are considered real property. Personal property taxes are typically used to fund public works projects, such as road maintenance or the construction of schools.

Key Takeaways

  • A personal property tax is a type of tax that's imposed by many state and general governments.
  • Personal property generally refers to valuable items like cars and boats, as opposed to real estate, which is considered real property.
  • States and localities with personal property taxes typically use the money to fund public works, such as schools and roads. 
  • The kinds of property that are taxed and the rates at which they're taxed will vary from place to place.

How Personal Property Taxes Work

States and local governments with personal property taxes can apply them differently, in terms of:

  • Which types of property are subject to tax
  • How the tax is calculated
  • What the funds raised from personal property taxes are used for

In North Carolina, for example, property tax is assessed locally and collected by individual counties. The North Carolina Department of Revenue, which collects sales and income tax, plays no part in the collection or management of personal property taxes.

North Carolina residents are subject to taxes on both real property and tangible personal property, divided into three categories:

  • Real property
  • Personal property
  • Motor vehicles

Other states, such as New York, only tax real property, like land and buildings, although they and their local governments may collect sales tax on personal property at the time it is purchased. In the case of personal property like automobiles and motorcycles, states also collect revenue in the form of registration and licensing fees.

Tip

If you disagree with a personal property tax assessment, you should be able to appeal it with your local tax office. Look for details on their website.

Examples of Personal Property Tax

Because state and local and governments define personal property differently, what's considered personal property in one state may not fall under that same umbrella in another. As mentioned, not every state taxes personal property at all. And many that do tax it provide exemptions for personal property that is worth less than a certain amount.

Personal property can also include assets owned by a business. Some typical examples are:

  • Machinery
  • Equipment
  • Furniture
  • Photocopiers
  • Computers
  • Telephones
  • Supplies

How Personal Property Taxes Are Calculated

Broadly speaking, personal property tax is calculated based on the value of the property in question and generally assessed as a percentage of that value. Taxes based on the value of property are sometimes referred to as ad valorem taxes.

Tax assessors determine the value of personal property in different ways. In Missouri, for example, the City of St. Louis sets car values based on the average trade-in value for that make, model, and year, as established by the National Automobile Dealers Association.

The tax rate and how it's applied will also vary by state and locality. Some states, for example, impose a flat tax rate across all property types, including real property, personal property, and vehicles. Others have different rates for different kinds of property. Many allow counties or other local governments to determine what rate to impose, although the state may set limits.

In California, for example, the basic property tax rate is 1%. This applies to personal property owned by individuals or businesses, as well as to real property. But California counties can also add fees or other charges to their personal property tax assessments.

Your local tax assessor's office (or its website) should be able to supply information on the personal property tax rate (if any) that you're subject to and what types of property are included.

Note

Personal property tax rates are periodically updated and property values are reassessed, which could result in your tax bill increasing or decreasing from one year to the next.

How to File and Pay Personal Property Tax

Typically, personal property tax is due annually and assessed on Jan. 1 of each year. Bills are then mailed out to individuals or businesses that owe the tax.

When you purchase certain types of personal property, you may need to register them with your local tax office. This generally means completing a form either online or in-person at the tax assessor's office, listing the details of the property.

Whether you need to file this sort of form can depend on where you live and the value of the property. In Orange County, California, for example, filing a business property statement form listing business personal property is only required when the aggregate value of the property is $100,000 or more. So if you run a business but your equipment is valued at less than $100,000 in total, it wouldn't be necessary to file.

There may be a set deadline for filing this form each year. Using Orange County as an example once again, the deadline is April 1. Businesses can, however, file for an extension if they need more time.