Not Everything Is Bigger In Texas: Minimize your Vehicle and Business Personal Property Tax This Year

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If you’ve ever lived in a state like North or South Carolina, you have had the (un)fortunate distinction every year of paying personal property taxes on your personal vehicle as part of the registration renewal process. But if you’ve recently moved to Texas, you may be asking yourself, “Do I still have to pay those pesky personal vehicle property taxes?”

 

Owned vs. Leased

In Texas, only income-producing, tangible personal property is subject to personal property tax. In order to meet the property tax code’s definition of “income-producing,” a vehicle must drive more than 50 percent of its miles for activities that involve the production of income within a tax year. The obvious examples are delivery vans, contractor pickup trucks, taxis, buses – you get the idea. And while you may think your personal vehicle would not meet this definition, if you’re self-employed, you may very well fit this criteria.

Real estate agents, salespersons and lawyers are all examples of occupations that have “billable hours” tied to the vehicle that they drive, not only for work, but also for leisure. Luckily, the state of Texas recognizes that vehicles serve multiple functions for many modern-day workers, and thus created an opportunity for the self-employed to report their vehicle for personal use and avoid being subjected to additional taxes. The responsibility, however, lies with the taxpayer to report a personal-use vehicle as exempt when they report their taxable business personal property to the appraisal district every year.

You may be asking yourself, “What about a leased vehicle?” Although you’re not necessarily producing income as the end-user, it is actually producing income for the leasing company. In this case, the responsibility belongs to the leasing company to not only report all personal-use vehicles to the appraisal district, but to also provide copies of fully executed, personal-use affidavits if they are subject to an audit. And would it surprise you to know that in Dallas County alone, there are eight cities that have chosen to tax personal-use vehicles that are leased, regardless if the end-user is using the vehicle for business purposes? Each jurisdiction had to opt in or out of taxing the vehicles at the time the legislation went into effect.

 

The Cost of Your Income-Producing Vehicle

So what can a taxable vehicle cost the average taxpayer? The current average price of a new car is roughly $33,560* and will reach “market value” of $27,850 given one year’s depreciation. With this, a taxpayer could be looking at a roughly $700 tax bill every year, per vehicle. If you don’t file the appropriate form with the appraisal district, you may very well find yourself $700 short. This will also be the result if you don’t execute a leased vehicle affidavit properly. And, if you lease a vehicle in Addison? Unfortunately, you may find yourself paying $700 whether you like it or not.

At the end of the day, you could be paying more than you need to without even realizing it. Our business personal property tax consultants know all of the ins and outs of filing requirements and property tax appeal deadlines, and can take away the headache of knowing whether or not you should be paying personal property tax on your vehicle. So even though everything’s bigger in Texas, your vehicle property taxes don’t need to be.

 

*Source: http://www.usatoday.com/story/money/cars/2015/05/04/new-car-transaction-price-3-kbb-kelley-blue-book/26690191/

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