Business Property Tax | How to Calculate, Tips, & More
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Everything You Need to Know About Business Property Tax

exterior of an office building

As a business owner, you’re responsible for paying certain business-related taxes. If you own property that you use for business operations, one of the taxes you need to pay is business property tax. Read on to learn all about property tax for business, including how to calculate and pay it.

What is business property tax?

Business property tax is the tax a business owner is responsible for paying on company-owned property. Just like a homeowner pays property tax on their home, your company needs to pay tax on your property. You must pay business property taxes on the following:

  • Land
  • Real estate (e.g., building)

Business property taxes depend on your locality. In most cases, your property taxes for business are assessed by the city or county where the property is located. Business property taxes typically help fund local schools, public safety, and construction projects (e.g., new roads).

Your business property tax rate is based on the value of your business’s land or real estate. Your local tax department determines the value of your business property and the amount of annual property taxes you must pay.

Additionally, you may need to pay property taxes when it comes to buying or selling business property. For example, you likely have to pay property taxes when you’re buying or selling a business. Some localities split the property tax between the buyer and the seller, depending on how long each person owned the property during the tax year.

On top of paying business property tax for buildings and land, you may also be required to pay another type of tax called business personal property tax.

definition of business property tax

Business personal property tax

Business personal property, or tangible personal property, are any goods your business owns and uses that are necessary for business operations. A few examples of business personal property include:

  • Furniture (e.g., desks and chairs)
  • Computers
  • Printers
  • Telephones
  • Business equipment (e.g., registers)
  • Tools
  • Supplies

Depending on your locality, you may need to pay taxes on business personal property. Your local tax authority may require you to pay an annual value tax on your personal property on top of your business property tax. Generally, the IRS allows you to apply for deductions on business personal property items if they are taxed by your local tax authority.

Check with your locality for more information on whether or not you are responsible for paying business personal property taxes.

How to calculate business property tax

Calculating business property tax can be difficult because it varies by city, county, and state. Most of the time, your local authority will do the calculation for you and send you your assessment via mail.

Although there’s no precise universal formula, your business property tax bill is generally calculated by multiplying your property tax rate by the assessed value of your property. Typically, the higher the assessed value of your property, the more you pay in property tax for your business.

For example, New York City uses four steps to calculate property taxes for businesses. And, they have varying tax rates for different types of property. New York City’s steps to calculate property taxes include:

  1. Determining market value
  2. Determining assessed value
  3. Determining transitional assessed value, if applicable
  4. Applying any exemptions

To get an idea of how much property tax you will have to pay your locality, research property tax laws and rates in your area and reach out to your local tax office for more details.

How to pay property tax for business

When and how you pay your business property taxes is up to your city or county. Your local tax authority will assess your property and send you a bill for the taxes you owe. Many localities tend to send out property tax bills on an annual basis, but some send them out more frequently (e.g., quarterly).

After you receive your bill, verify that the amount seems correct before paying it. If your business property tax bill seems inaccurate, contact your local tax office. You can appeal to the town or city if you feel that you’re being charged too much.

Pay your tax liability amount by the date indicated on your bill. Depending on your state and locality, you may have the option to pay your property tax bill electronically or via mail.

Business property tax deductions

Yes, you are required to pay business property taxes based on your locality. However, you do have the opportunity to deduct your company property taxes as expenses. The IRS outlines what business expenses you can deduct in Publication 535.

Based on Publication 535, businesses can usually deduct real business property taxes if they’re based on the assessed value of the property. But, businesses typically cannot deduct property taxes that:

  • Increase the property’s value
  • Are charged for local benefits and improvements

Again, when it comes to business personal property tax, the IRS allows you to deduct some personal property items (e.g., desks, computers, etc.) used for business.

Contact the IRS if you have any questions about business property tax deductions for your company.

Tips for handling business property tax

Managing property taxes for business doesn’t have to be a painful task. To make handling business property taxes a snap, take a look at a few tips:

  1. Get to know your local tax laws inside and out
  2. Research potential deductions and exemptions
  3. Review your property forms and bills carefully
  4. Hire a tax advisor or accountant to help out
  5. Utilize basic accounting software

Also, if you are a new entrepreneur scoping out a business location, consider taxes before you make a property decision. Business property taxes vary depending on your state and city, so be sure to do your homework on how the property taxes in a certain location will affect your business.

Need an easy way to track your business expenses and income? Patriot’s accounting software helps you streamline your books so you can get back to business. Try it for free today!

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This is not intended as legal advice; for more information, please click here.