What Is Personal Property Tax?

Daniel Rathburn is an associate editor at The Balance. He has over three years of experience working in print and digital media as a fact-checker and editor. Daniel holds a bachelor's degree in English and political science from Michigan State University.

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Personal property taxes are taxes imposed based on the value of personal property that is “movable.”

Key Takeaways

• Depending on where you live, you may have to pay personal property tax.
• Personal property tax refers to property that is movable, such as cars, boats, or equipment.
• Each state or local government has its own rules regarding what counts as personal property and how the taxes owed are calculated and collected.
• If you itemize, you could claim a deduction on your federal tax return for personal property taxes you pay.

How Personal Property Tax Works

Personal property taxes are based on the value of owned property (referred to as an "ad valorem" tax) and must be imposed annually.

Personal property tax is different from "real" property (or real estate) tax that applies to homes, buildings, or land. The main distinction is that personal property refers to movable property or assets like vehicles, boats, equipment, or furnishings. Whereas real property only includes fixed or immovable structures or property.

Each state or locality may have a slightly different definition of what constitutes taxable personal property and what items are exempt. For example, in California, taxable personal property must be tangible, and can include items such as portable equipment, tools, office items and furniture, and the like. Some places may include animals or livestock as personal property.

In addition to real property tax (building and land property), some states or jurisdictions also tax personal property that is not attached to the land, like vehicles, furnishings, and boats.

Note

Personal property tax are sometimes referred to as ad valorem tax which refers to a tax that's assessed based on an item's value. Personal property taxes are an example of an ad valorem tax.

Example of Personal Property

To give an example, this is how it works for residents of Oregon, as per the Oregon Department of Revenue. Personal property is valued at 100% of its real market value. Anyone who has taxable personal property has to file a return by March 15. They will then receive by mail a property tax statement in late October.

The taxpayer is obligated to pay at least one-third of that tax bill by November 15 to avoid interest charges. If they pay in full by that point, they get a 3% discount on the bill. If not, the remaining payments are due February 15 and May 15. Outstanding balances will turn into a lien on all personal property by July 1.

Do I Need to Pay Personal Property Taxes?

If you reside in a state or locality that imposes personal property taxes, you're required to pay them or will face a penalty from the IRS. Although each state and local government has its own rules and personal property tax rates, the good news is all taxpayers are entitled to claim a deduction for personal property taxes on their federal income tax if they itemize.

The only requirements for deducting personal property taxes are that the taxes you paid must be based on the property value, and the tax must be imposed on an annual basis.

Frequently Asked Questions (FAQs)

What's the difference between real property and personal property?

For tax purposes, real property generally refers to real estate, or anything you own that is immovable or part of the land. Personal property is anything you own that you can move and take with you.

Is personal property tax a direct tax?

Since you pay personal property tax directly to the government when you file your annual income taxes, it is a direct tax. Indirect taxes may be involved in the purchase of property somewhere along the chain of ownership, but these are taxes that can be offloaded to another party, such as the seller.

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

1. California State Board of Equalization. "Property Tax: An Overview," Page 6.
2. Internal Revenue Service. "Topic No. 503 Deductible Taxes."
3. Oregon Department of Revenue. "Personal Property Assessment and Taxation."
4. Internal Revenue Service. "2021 Instructions for Schedule A," Page 7.

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