Tuesday, March 10, 2015

Tax savings tip to businesses that pay personal property taxes

Taxes for personal property (which generally consists of business inventory, office equipment or furniture, and certain tangible items such as boats and aircraft) may be deductible expenses on your federal tax return if you itemize. TurboTax offers the following information about personal property tax deductions:
If you itemize deductions on your federal tax return, you may be able to claim a deduction for the personal property taxes you've paid. One method that states can use to raise revenue is to charge you a tax on your personal property. This type of tax is separate, and may be in addition, to the state and local taxes you pay on your real estate. However, if you itemize deductions on your federal return, you may be eligible to claim a deduction for all personal property taxes you pay…
When you can deduct personal property tax
If you end up paying personal property taxes to your local government, the IRS allows you to claim a deduction for it on your federal tax return. However, the IRS requires you to satisfy certain requirements, regardless of how your government classifies the tax. To claim the deduction, the tax must only apply to personal property you own, be based on its value and be charged on an annual basis, irrespective of when the government collects it from you. Therefore, if the state only charges the tax at the time you purchase the property then it does not meet the IRS definition of a deductible personal property tax. 
How to deduct personal property taxes
Paying a personal property tax is not always enough to claim the deduction. In addition to satisfying the IRS requirements, you must also be eligible to itemize, since this is the only way you can claim the deduction. To determine whether you are eligible to itemize, simply add up all of your expenses for the year that are eligible for a deduction, such as medical expenses, charitable contributions and mortgage interest payments. If the total is more than the standard deduction you can claim for your filing status, then go ahead and itemize and take a deduction for your personal property tax payments. 

There are about 400 personal property taxpayers in Decatur that pay these taxes to Decatur and to DeKalb County.  To verify how much you paid in personal property taxes to Decatur in 2014, please use our website at www.decaturgatax.com where you can print a receipt from your account or a tax bill reflecting your charges and payments.

As always, this blog is not intended to provide instructions on how you should file your income taxes or how much you should deduct. Since individual circumstances vary, please contact an income tax professional for verification and further guidance.

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