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How Personal Property Taxes Work

By: Sarah Siddons  | 

What Makes Personal Property Tax Bills Change?

beat-up car
Although a newer, nicer car might be more desirable, a beat-up car like this one will have low personal property taxes.
Melanie Stetson Freeman/The Christian Science Monitor/Getty Images

Personal property tax bills do not fluctuate like real estate property taxes do, so while they do change over time, the amount doesn't change wildly from year to year.

For example, real estate property taxes are often based on a percentage of the market value of your property. Market value can oscillate based on the area around you. If your neighbors all renovate their homes, the market value for the area goes up, but then so do your real estate property taxes, even though you didn't do anything. Personal property taxes don't work that way. If all of your neighbors buy new cars, your car's personal property tax rate does not change. However, some circumstances can cause variations in tax bills.

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Rates change from year to year based on depreciation. In general, age and wear-and-tear make your items less valuable. However, even the same items can be taxed differently. For example, you and your neighbor own the same car. It's the same make, model, year and color, and you even have the exact same optional features on it. Seems like they should be taxed the same, right? Not necessarily.

Let's say you take great care of your car. You wash and wax it regularly, keeping the inside and outside in good condition. You keep it in the garage, and because you work from home, you only drive it once a week to the store. When you do drive it, you park far away to be sure that it does not get dinged by runaway shopping carts.

Meanwhile, your neighbor commutes 50 miles to and from work every day. He drives 400 miles every other weekend to visit his family. He has gotten into a couple minor fender benders. Since they just dented his car a bit, he didn't get them fixed. Plus, he parks his car on the street, where the bumpers get scratched, and the paint is starting to fade from the weather.

Your car's exceptionally low mileage and great condition mean it's worth more than your neighbor's worn-down car, even though they're the same vehicle. However, because you have the nicer car, your car's market value is higher, and your personal property taxes will be higher too. Take heart knowing that you will make a lot more if you sell it — and of course, you have the sweeter ride.

Personal property taxes don't fluctuate much within a state, but if you're moving to a new state, you may want to check its taxes. What is taxable may change. You might even be moving to a state without personal property taxes. A few states, including Delaware, Illinois and New York, exempt all tangible personal property from taxation. And 24 states have no tax on vehicles.

To learn more about personal property taxes, follow the links below.

Personal Property Taxes FAQ

What states have personal property tax?
A total of 43 U.S. states charge personal property taxes. The only states that do not are Iowa, Illinois, Ohio, Pennsylvania, New York, New Hampshire, and Delaware.
What is an example of a personal property tax?
Typically, personal property taxes are applied to household personal property items, like cars, recreational vehicles, or boats.
What state has the highest personal property tax?
New Jersey is home to the highest property tax rates.
What states have personal property tax on cars?
26 states charge a personal property tax on cars. These states include Michigan, Louisiana, Connecticut, Kansas, and Virginia.
How do you get a personal property tax waiver?
You'll need to check with the tax laws in your state of residence to determine what's needed to get a personal property tax waiver. The eligibility requirements vary from state to state.

Originally Published: Jul 29, 2008

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Sources

  • Arlington Va. "Taxes & Payment." (Feb. 23, 2021) https://taxes.arlingtonva.us/vehicles/vehicle-taxes/
  • City of Virginia Beach. "Military Personal Property & Local Vehicle Registration (LVR) Exemption." (Feb. 23, 2021)
  • City of Virginia Beach. "Military Personal Property & Local Vehicle Registration (LVR) Exemption." (Feb. 23, 2021)https://www.vbgov.com/government/departments/commissioner-of-the-revenue/Tax%20Relief/Pages/military-pp-local-vehicle-registration-exemption.aspx
  • Maryland Taxes. "Business Personal Property Taxes." (Feb. 23, 2021) https://marylandtaxes.gov/business/business-personal-property/index.php
  • Rosevear, John. "The States With the Lowest Car Tax." The Motley Fool. Oct. 2, 2018. (Feb. 23, 2021) https://www.fool.com/investing/general/2015/05/29/the-states-with-the-lowest-car-tax.aspx
  • Saint Louis County Revenue. "Personal Property Information." http://revenue.stlouisco.com/Collection/ppInfo/ (May 12, 2008)
  • Watson, Garrett. "States Should Continue to Reform Taxes on Tangible Personal Property." Tax Foundation. Aug. 6, 2019. (Feb. 23, 2021)
  • Watson, Garrett. "States Should Continue to Reform Taxes on Tangible Personal Property." Tax Foundation. Aug. 6, 2019. (Feb. 23, 2021)https://taxfoundation.org/tangible-personal-property-tax/