tangible personal property

What is tangible personal property?

Tangible personal property is a tax term used to describe personal property that can be physically moved, such as furniture and office equipment. Tangible personal property is always depreciated over a five- or seven-year period using the straight-line method, but is also eligible for accelerated depreciation.

Tangible personal property is anything other than real property (land and buildings) that is used for business operations or rental properties.

Understanding Tangible Personal Property

Tangible personal property is in a sense the opposite of real property because real property is real property. In contrast to intangible personal property, tangible property is touchable. Compare property such as furniture, machinery, cell phones, computers, and collectibles with invisible or intangible assets such as patents, copyrights, and non-compete agreements.

key takeaways

  • Tangible personal property includes a wide variety of equipment, from small office equipment to light trucks and buses.
  • Tangible property also includes all miscellaneous assets, such as jewelry, toys, and sports equipment, that are inherently incompatible with any other class of life.
  • Tangible personal property represents any table, bed, lamp, or other furniture that can be used in a rental home or business.

Tangible personal property is subject to ad valorem tax. In most states, businesses that owned tangible property on January 1 had until April 1 of the same year to file a tax return with the property appraisal office. A property appraiser appraises a property, and the tax payable is calculated by multiplying the property’s value by the rate set by the state’s tax authority.

Owners who rent or rent out tangible personal property must also file this return for tax purposes.

Some counties and cities require filers to list all property on their tax return and provide the fair market value and cost of each tangible property. In these cases, the county will also provide an appraisal form that can be used to estimate the value of the property based on its age and useful life. Some states only tax tangible property in the year the property was purchased.

Examples of Taxes and Tangible Personal Property

Any tangible property owned by a new business that was owned on January 1 must file an initial tax return for that property. After the first year of filing, businesses are required to file a tax return if the assessed value of personal property exceeds $25,000 in any year. The property appraisal office usually sends a letter to the company in the mail notifying it of paying taxes on its property. If the company or landlord believes the letter does not apply, the letter may be returned to the office with another letter explaining why taxing tangible personal property does not apply to businesses.

Tangible personal property taxes are paid by the landlord or company to the local government, but the landlord or company owner can claim a deduction on the federal income tax return. To claim the deduction, the tax must apply only to personal property owned and purchased for the operation of the business, based on its fair market value, and charged annually (rather than a lump sum).

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