State Personal Property Tax Law

Under United States tax laws, personal property taxes, often referred to as “tangible personal property taxes,” are imposed by many states. These taxes apply to movable assets—things that aren’t fixed or immovable. However, personal property tax obligations and rights vary significantly from one state to another.

While some states, such as Illinois and Ohio, do not impose personal property taxes at all, others, such as Vermont and Kansas, do. Still, some other states only apply personal property taxes on certain types of property, like vehicles.

Here is a summary of the states that have personal property taxes and their effective property tax rates:

• Alabama taxes personal property at 5.76% of its total property tax base and has an effective property tax rate of 0.33%.
• Alaska taxes personal property at 13.95% of its total property tax base and has an effective property tax rate of 1.04%.
• Arizona taxes personal property at 9.64% of its total property tax base and has an effective property tax rate of 0.72%.
• Arkansas taxes personal property at 14.35% of its total property tax base and has an effective property tax rate of 0.52%.
• California taxes personal property at 4.63% of its total property tax base and has an effective property tax rate of 0.74%.
• Colorado taxes personal property at 10.77% of its total property tax base and has an effective property tax rate of 0.6%.
• Connecticut taxes personal property at 29.01% of its total property tax base and has an effective property tax rate of 1.63%.
• Delaware does not have personal property taxes and has an effective property tax rate of 0.43%.
• Florida taxes personal property at 7.64% of its total property tax base and has an effective property tax rate of 0.97%.
• Georgia taxes personal property at 8.94% of its total property tax base and has an effective property tax rate of 0.83%.
• Hawaii does not have personal property taxes and has an effective property tax rate of 0.26%.
• Idaho taxes personal property at 9.98% of its total property tax base and has an effective property tax rate of 0.69%.
• Illinois taxes personal property at 4.75% of its total property tax base and has an effective property tax rate of 1.73%.
• Indiana taxes personal property at 9.87% of its total property tax base and has an effective property tax rate of 0.85%.
• Iowa taxes personal property at 11.27% of its total property tax base and has an effective property tax rate of 1.29%.
• Kansas taxes personal property at 14.98% of its total property tax base and has an effective property tax rate of 1.29%.
• Kentucky taxes personal property at 10.84% of its total property tax base and has an effective property tax rate of 0.72%.

The following states do not report the percentage of their total property tax base that comes from personal property, but they do have some form of personal property taxation:

• Louisiana has an effective property tax rate of 0.18%. It exempts most household goods, vehicles, and intangible assets from personal property taxation, but it does levy a severance tax on natural resources extracted from the state.
• Maine has an effective property tax rate of 1.09%. It allows municipalities to impose a local option tax on certain types of business equipment.
• Maryland has an effective property tax rate of 0.87%. It exempts household goods, vehicles, and intangible assets from personal property taxation, but it does require businesses to file annual reports on their taxable personal property.
• Massachusetts has an effective property tax rate of 1.04%. It exempts household goods, vehicles, and intangible assets from personal property taxation, but it does impose a local excise tax on certain types of motor vehicles.
• Michigan has an effective property tax rate of 1.62%. It exempts household goods, vehicles, and intangible assets from personal property taxation, but it does levy a state education tax on industrial and commercial personal property.
• Minnesota has an effective property tax rate of 1.05%. It exempts household goods, vehicles, and intangible assets from personal property taxation, but it does assess a state general tax on certain types of business equipment.
• Mississippi has an effective property tax rate of 0.52%. It exempts household goods, vehicles, and intangible assets from personal property taxation, but it does apply a state ad valorem tax on certain types of business equipment.
• Missouri has an effective property tax rate of 0.91%. It exempts household goods, vehicles, and intangible assets from personal property taxation, but it does impose a local personal property tax on motor vehicles, boats, trailers, livestock, and farm machinery.
• Montana has an effective property tax rate of 0.83%. It exempts household goods, vehicles, and intangible assets from personal property taxation, but it does levy a state property tax on certain types of business equipment.
• Nebraska has an effective property tax rate of 1.76%. It exempts household goods, vehicles, and intangible assets from personal property taxation, but it does assess a state personal property tax on certain types of business equipment.

What Personal Property Is Subject to Taxes?

The definition of personal property for tax purposes varies from state to state. Generally, personal property refers to all types of tangible property other than real estate. This could include vehicles, boats, furniture, jewelry, and collectibles, among other items. However, many states exclude household goods from personal property taxes.

For businesses, personal property taxes may apply to machinery, equipment, and other assets used in the operation of the business. Intangible assets such as trademarks or patents, on the other hand, are usually exempt from personal property taxes, although they may be subject to other types of taxation.

What Qualifies as State Personal Property Taxes?

State personal property taxes are typically levied on the assessed value of the taxable personal property. The assessed value is usually based on the property’s fair market value, which is what it would sell for in the current market.

Depending on the state, the tax rate may be a flat rate applied across all types of personal property, or it may vary based on the type of property. For example, vehicles and boats may be taxed at different rates.

Are There Restrictions on Personal Property Taxes?

Yes, there are restrictions on personal property taxes, which largely depend on the specific tax laws of a state. Some states exempt certain types of personal property from taxation, such as household goods or farm animals. Other states may offer tax exemptions or reductions for personal property used for certain purposes, such as farming or manufacturing.

Certain groups of people, such as veterans or senior citizens, may be eligible for personal property tax exemptions or reductions as well.

Personal Property vs. Real Property Taxes: Deed of Trust and Your Tax Obligations

One significant distinction between personal property taxes and real property taxes lies in the nature of the property being taxed. Personal property refers to movable items such as vehicles, jewelry, and certain business assets, while real property refers to land and anything permanently affixed to it, like buildings or homes.

A deed of trust, which is a document often used in real estate transactions, directly ties into real property taxes. It involves three parties: the borrower (trustor), the lender (beneficiary), and a neutral third party (trustee). When a borrower takes out a mortgage, they may sign a deed of trust that transfers the property title to a trustee until the loan is paid in full. Once the loan is repaid, the title is transferred back to the borrower. However, the borrower is responsible for paying the real property taxes during this period.

Do I Need an Attorney to Help Me With My Personal Property Tax Matter?

If you’re facing issues related to personal property taxes, it may be beneficial to consult with an experienced tax attorney. A tax lawyer can provide guidance on tax obligations and rights related to personal property taxes, help you understand complex tax laws, and assist you with tax planning strategies to minimize your tax liability. They can also represent you in disputes with tax authorities or in court if necessary.

If you’re unsure about your tax obligations or believe you’ve been unfairly taxed, reach out to a tax attorney through LegalMatch today. They can provide you with personalized advice tailored to your specific situation and represent your interests effectively, ensuring you’re in compliance with tax laws while protecting your rights.