Every business has property. Even the small business you are running now has a desk or other furniture, a computer/laptop, a filing cabinet, and so on.
Have you ever considered the impact these properties have on the value of your business, taxes, and how you can manage the effect? Fret no more. We will tell you everything you need to know about business personal property.
What Is Business Personal Property?
Business Personal property is any item you use to conduct business and is not attached to the land or structure on real estate. It’s movable; you may carry it if you change your business location. These include machinery, business equipment, office furniture, inventories, and business vehicles. The list may be longer or shorter depending on how the state you are operating the business defines the business’s personal property.
Every business has at least one of these items, which are taxable in many states. Most states with business personal property tax only tax physical assets. Intangible assets such as trademarks, patents, licenses, and software will be exempted.
How Business Personal Property Affects Business Taxes
The sale of personal business property must be recorded and included in your tax return. In that case, it affects income tax and real estate tax.
Business personal property is shown on the balance sheet as a business asset. A table that will help you determine the depreciation and, therefore, the value of your assets is shown on the asset side of the balance sheet.
How States Tax Business Personal Properties
Personal property taxes are assessed within the localities – counties, cities, towns, and even villages. Each state oversees property taxes in all localities, and two officials are involved.
Assessor – Establishes the value of your property.
Tax collector – Collect payment, send tax bills, and approve deferral and exemption.
You will file a business personal property tax return with an assessor. As mentioned before, your jurisdiction will offer you a table that will help you determine the market value of your property after factoring in the depreciation on the applicable asset. Each jurisdiction also has an assessment ratio that varies depending on the jurisdiction and type of property. The ratio ranges from 100% to a small fraction.
Once your property market value is determined, the assessor multiplies the value by the jurisdiction assessment ratio to find your property’s assessed value. The collector will then send you your personal property tax bill, which is obtained by multiplying the property’s assessed value by its tax rate.
How To Manage Business Personal Property Taxes
You can manage your business property taxes so that you reduce the tax bill in the following ways:
- Be Proactive with Tax Appeals
You can appeal to the assessment to contest the method of determining a fair market value. The appeal process depends on the jurisdiction, and being proactive in these appeals can save you on tax bills.
- Always Fill the Form Accurately and Comply with the Filing Requirement
Please meet compliance requirements and ensure you fill out the necessary forms property to avoid penalties. If you fall short in these areas, the assessor will add all the necessary penalties and interests for non-compliance or improper filing while determining the value of the business’s personal property.
You also risk losing your tax liability protection and increasing personal property taxes. Therefore, you should ensure your business personal property is well documented, managed, and reported accurately.
You can hire a registered agent to help you receive government notifications so that you can take advantage of important deadlines. A registered agent can be an individual or a company, such as a business formation service.
- Know Your Depreciation Options
Long-term business personal property such as vehicles and machinery offer significant depreciation expenses. You can take advantage of depreciation on purchases when buying business personal property.
Which States Have A Business Personal Property Tax?
Most states tax business personal property. Among the list are a few states that only tax industry-specific business personal property.
Most states with business personal property tax offer exemptions for businesses with a total personal property under a given amount or a property below a particular value. But some states exempt entire industries.
Because most states have business personal property taxation, we offer you a list of states that don’t have this taxation and those that only tax selected industries. The states with no business personal property taxes include:
- New Jersey
- New York
States that tax business personal properties in the selected industries include:
- New Hampshire
- North Dakota
- South Dakota
Our guide on what to know about the business’s personal property was helpful. You now know how it works, how you can manage it, and the states that don’t have such taxation.