One of the biggest mistakes you could make as a business owner is viewing your property taxes as fixed costs. While these costs are a big chunk of your operational expenses, they aren’t fixed, and you do have power over them.
Unfortunately, many companies fail to realize the tax benefits associated with personal property. This is moveable property within your business, such as furniture and equipment. If your commercial property is in a state that taxes personal property, you must file an annual compliance return that values your assets. The taxing jurisdiction then reviews your return and issues an assessment notice, which may match, increase or decrease the reported value of your personal property.
With expert personal property tax management, you could leverage this process to secure savings.
What’s Standing In The Way Of Your Savings?
So if personal property taxes have such a heavy impact on operational costs, why don’t companies take greater steps to reduce them? Numerous challenges act as barriers to savings.
Assets aren’t documented. Keeping a close eye on your assets is time-consuming, which is why so many companies fail to do it. Personal property taxes encompass all of your non-real estate assets, making it imperative that you regularly update your records. Are you maintaining current records of the acquisition, disposal and transfer of your assets?
Inventory is mismanaged. Another time-consuming, tedious challenge that stands in the way of personal property savings is adequate inventory management. Like monitoring your assets, managing your inventory is no easy task. It takes time and resources that many companies can’t spare. As a result, you could be paying personal property taxes on more inventory than you actually possess or paying taxes on inventory that might be eligible for an exemption, leading to taxes that are too high.
Not taking advantage of exemptions, especially the Freeport Inventory Exemptions, is another missed opportunity for savings. Under this tax break, inventory manufactured on-site and shipped within 12 months is exempt from business personal property taxes in many states. If you’re eligible for this tax break and not taking advantage of it, you’re leaving money on the table.
Personal property taxes are complex. If you’re not in the real estate business and don’t have experience with personal property taxes, you won’t know all the ways to secure savings. You’ll be unable to leverage personal property for savings, due to a lack of knowledge about the grounds for additional allowances for personal property, such as exemptions or obsolescence.
6 Secrets For Securing Personal Property Tax Savings
Unless you’re a property tax adviser, you may not realize the potential for savings rooted in your personal property. Explore the secret steps you should take to leverage your personal property for savings.
- Research your jurisdiction’s requirements and allowances for personal property.
- Talk to your assessor about your Business Personal Property tax return, for clarification or insight.
- Reclassify assets in order to take advantage of faster depreciation over a shorter life.
- Leverage and value external forces that have caused a reduction in production and revenue. For example, if your industry is in decline and you’re using your machinery less or manufacturing less of your product, the value of your assets and inventory could be affected.
- Calculate obsolescence for aged equipment and its impact on value.
- Calculate obsolescence as a result of layoffs, canceled customer orders or idle equipment.
With enough knowledge and the right recording systems for your assets and inventory, you’re ready to tackle personal property tax management and secure savings on your next return.
Learn more ways to secure savings by using our free property tax savings calculator.