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Understanding the Tax On Business Personal Property

Whether you’re new to real estate or have years of experience and decide to open your own office, one very important thing to keep in mind is that property taxes are assessed annually on your office equipment and possibly your business vehicles.

Texas law requires all business owners, including individuals, partnerships and corporations, to annually provide or render a list of tangible personal property that they own and use in their business on January 1. If you fail to do this by April 15, it can result in a penalty equal to 10 percent of the amount of property taxes ultimately imposed on the property.

Tangible personal property is property that is movable, as opposed to real estate such as land, buildings and other items attached to the land. Tangible personal property refers to any type of property that can be moved and touched. Business personal property used for the production of income is taxable by taxing units (e.g., counties, cities, school districts) if it is physically located in the unit on January 1. Examples of taxable business personal property include such things as office equipment, business vehicles, vessels, aircraft, machinery, inventory, supplies and raw materials held for business purposes. This type of property is taxable whether it is located in an office building, warehouse, or even when the business is operated from a personal residence.

Individuals who own a vehicle that is used for both business and personal use are entitled to claim an exemption on such mixed use vehicle by filing a one-time exemption application with the appraisal district. The exemption isn’t available if the vehicle is owned by a corporation or partnership and registered in the name of the entity, or used to transport passengers for hire.

Unless business personal property is worth less than $500, business owners must render annually to the chief appraiser the tangible personal property that they own and use for the production of income on January 1. The rendition requirement is applicable regardless of whether the business personal property is owned by an individual, a partnership or a corporation. The rendition statement must contain the following:

  1. the name and address of the property owner;
  2. a description of the property by type or category;
  3. if the property is inventory, a description of each type of inventory and a general estimate of the quantity of each type of inventory;
  4. the physical (taxable) location of the property; and
  5. if your estimate of the total market value of your business assets is $20,000 or more, the rendition statement must also contain the property owner’s good faith estimate of the market value of the property; or, at the option of the property owner, the statement must contain the historical cost when new and the year of property acquisition.

Check with your appraisal district to see if free rendition workshops are offered. For rendition forms, please visit the following websites based on your appraisal district:

Harris County- www.hcad.org/forms

Brazoria County – http://www.brazoriacad.org/Forms.htm

Galveston County – http://www.galvestoncad.org/PA/Forms/Forms.htm

Fort Bend County – http://www.fbcad.org/Appraisal/PublicAccess/Images/Forms/Forms.htm

Montgomery County – http://www.mcad-tx.org/html/forms.html

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