As an individual, you will always have different things: a company, a car, a house, and others. These elements are said to be properties- assets that belong to a particular individual, and there is recorded documentation for the same.
Now, properties are usually classified into two main types based on several factors. And it is because of this classification that the taxpayers need to pay different taxes to the government. Visit the local property appraiser like Marion County property appraiser, if this is your location, for your property value.
Classifications of Properties
Whenever we are talking about any asset, we are considering anything you own. However, a property is an asset that has documentation and solely under your name. Such things are usually classified into two major groups- personal property and real property.
Personal property
From the name itself, you can understand that personal property is a kind of asset that can be moved from one place to another. These properties can be demolished and given a new form. For example, the car you own is your personal asset. And, this object can be demolished, and the money can be used for any other purpose. The personal property can be further subdivided into two more categories based on the personal property tax, which a property appraiser will assess.
- Chattels: these are known as intangible properties as they can be seen and felt. For example, clothing or a purse are grouped under the chattels. If personal property is attached to a structure built on land, it is known as a fixture.
- Intangible properties: intangible personal properties are the ones that cannot be seen or felt. These include bank accounts, licenses, insurance policies, intellectual property, and others.
Real property
On the other hand, real property is immovable, and it mainly concerns homes, buildings, and lands. The name “real estate” signifies the real properties as a whole. According to the main definition of real property, land is considered the main asset of all the taxpayers classified under this criterion. Anything which will be attached to the land will be considered real property. Since it is taxed, you will have to hire a personal property to ease the process and reduce the taxed amount.
What Is Real Property?
This is a type of property that cannot be moved from one place to another. All those who have land are said to be real property owners. If the land has some construction like a house or a bridge, it also comes under a real property tagline. Since this property type is so broad, every taxpayer must take the help of a property appraiser to understand every detail about the effective tax rate, rights to property, and other information pieces related to the property taxes.
Types of Real Properties
Before moving onto further discussions, it is best to understand this real property’s classifications for tax purposes. This will help you communicate with a property appraiser to assess the property’s cost valuation and calculate the Valorem property taxes. For your convenience, here we have discussed the major types of real property classification.
Agriculture property
From the name itself, you can understand that this type of property is one where farmers can cultivate crops. It doesn’t matter what kind of crop he is growing; every agricultural landowner is a taxpayer who needs to pay a certain part of the tax to the government.
Residential property
This particular category of the property resembles the dwelling places, like houses, villas, condominiums, apartments, resorts, mansions, etc. Every taxpayer needs to pay the tax based on the assessed value of these properties done by a property appraiser.
Commercial property
Similar to the residential property, the public uses the commercial ones in general and open to everyone. Some of the best examples of property belonging to this group are office buildings, malls, theaters, etc.
Industrial property
The last type of real property you need to know to understand the property tax is the industrial one. These are usually included in the production and manufacturing zones. Factories, warehouses, lodging houses, and others are considered part of the industrial property.
Real Property VS Real Estate Property
Real estate is a subcategory of property that belongs to the real property classification. The real estate covers the land and any structure built on the plot. However, this particular subcategory doesn’t cover the rights and freedom of the owners. If you want to know more about the rights, you can easily hire a property appraiser who will easily explain the entire fact.
On the other hand, real property will cover the land and any structure built on it, along with the interests and rights of the property owners. This is the major point of difference between these classifications of property.
Are the Real Properties Taxable?
To answer your question, yes, the real properties are taxable. These are the kinds of assets that need prior permission from the government for having ownership. In the turn of your rights on the land and other structures attached to the same, as a taxpayer, you will be liable to pay off the levied tax on property. A property appraiser will assess the tax amount, and once done, this professional will be responsible for submitting an appeal.
Even though these properties are taxed with a huge amount, the taxpayer can opt for several exemptions based on the situation after discussing with a property appraiser. For example, the homestead tax exemption is applicable for property owners who are senior citizens, veterans or have low income. In some states, there are tax exemptions that prevent the forceful forfeiture of property for sales.
Since it’s not easy for a normal person to know everything about taxation, it is best to take a property appraiser’s guidance. These professionals are well acquainted with different tax rules levied by the government, and hence, they will be able to help you perfectly with the tax payouts and the exemptions.
What Are Tangible Properties?
Another type of asset that comes under the taxation rule of different US states is tangible properties. These items can be carried from one place to the other and usually fall under personal properties. These properties are usually subjected to depreciation, so it can be really difficult to calculate the taxes on such items. States like Michigan, Texas, and others usually charge progressive taxes in the tangible properties so that the taxpayer can pay the proper tax amount for both appreciation and depreciation in the valuation. Since assessment of tangible properties is really difficult, it’s best to hire a property appraiser.
Types of Tangible Properties
Several types of tangible assets are there, which you should know if you wish to avoid the high taxes levied on these items. Here, we have discussed the most common types of tangible properties on which the personal property tax is usually calculated with a property appraiser’s help.
- Vehicles: if you own a car or a bike, the property will be said to be tangible, and hence, it will be taxed accordingly. Since the car valuations usually suffer depreciation, your tax amount will decrease with each year. a property appraiser will follow up with the depreciation rate and accordingly provide you the taxed amount.
- Equipment: these can indicate the medical equipment, industrial equipment, storage equipment, etc. The taxes are levied based on the equipment valuation in the market, which a property appraiser does.
- Furniture: when you will buy furniture or sell one, a tax will be involved. You will have to know about the taxation rules related to the furniture category for income tax purposes.
- Inventory: the total inventory list is always taxed based on the government’s different rules. The inventories can be regarding goods, equipment pieces, foods, and so on. Based on the inventory type, a property appraiser will provide you with the entire tax calculation, along with the break-ups.
Tangible VS Intangible Properties
Before moving further into our discussions, it’s better to know the differences between tangible and intangible property. This will help you to understand several properties and Federal income tax rules related to personal property tax. Even though many hire a property appraiser, it’s best to know how tangible and intangible objects are different so that you can pay only the required amount.
Physical form
The first point of difference that we will explain here is the physical form. The tangible assets can be viewed and felt in physical forms like your car, phone, the apparel you wear, and others.
However, intangible assets have no physical existence. Rather they have a virtual form about which you know, but physically, they are non-existent.
Asset liquidation
One of the major points of difference between the two types of personal properties is based on the liquidation done by a property appraiser. Since the tangible properties have a physical existence, they are easier to sell. You can even get higher prices for such items without any hassle after the property appraiser completes the assessment.
On the other hand, when we are considering intangible assets, dissolving them is not easy. You will have first to get physical proof of them, be it a plan, a document, or anything else, and then only the liquidating process can be moved forward.
Value depreciation
Usually, when it comes to tangible properties, a property appraiser will calculate the depreciation over time. Take the example of a mobile phone. If a model costs you $2000 now, after five to six months, it will cost $1800.
As for the intangible assets, their values are amortized, either by paying off the resultant in regular intervals or transferred into another form of property. For example, you can easily convert your bank balance into shares in a company.
Asset risk
When it comes to risks, tangible items can be destroyed by any physical accident. For example, if you mistakenly drop your mobile in water, it will destroy the item. Similarly, if you get into an accident on the road, your car will be demolished.
As for the intangible assets, physical risks aren’t present. However, these assets are at market risks since a drop in the financial market will harm the intangible properties.
Are the Tangible Properties Taxable?
All the taxpayers need to pay the taxes for several tangible assets they own after a property appraiser review. This might include income tax, sales tax, property tax, and even Federal income tax. The rate at which the personal property tax will be decided usually varies from one state to another based on the same jurisdiction.
The property appraiser will assess the property value, and a document for the property appraisal must be produced at the time of submitting the tax return. Once the value is decided, it’s multiplied by the state-decided tax percentage, and then the final valuation of the tax is known.
Key Differences Between Real and Tangible Property
Even though a single individual owns both the real and tangible assets, there are considerable differences between them. Being one of the many taxpayers, it’s your responsibility to understand in which fields both these properties are different from each other so that you can hire the appropriate property appraiser.
Property type
The first thing you need to understand about both these properties is their types. Real property is always concerned with land and the related elements which are attached to the land. For example, a barren plot is taxed under a real property. However, if the same plot now has a building, every asset within the building will be considered real property.
As for the tangible properties, every item you own and can move from one place to another is known as tangible property. This can include your personal items like your mobile, laptop, car, food, and others. As for the commercial tangible assets, the list includes inventories, stocks, and others.
Rights of the taxpayers
The US state governments have issued several taxation rights for the taxpayers. These rights are different based on the type of property an individual has. When it comes to real property, several laws can lower the tax values and protect the rights and interests of all the relatable taxpayers. A property appraiser will introduce these laws to you so that you can reduce the amount effectively.
As for the tangible properties, the laws for protecting the property owner’s interests and rights are less. Tangible properties are far more destructible as compared to real properties. This is why perhaps tangible property owners have more restrictions.
Value change
The real properties are usually concerned with the land and the related structures built on the same property piece. Real properties always have an increasing curve in terms of valuation. Let’s say you are planning to buy a house worth $200000. After five years, when you sell the property, its value might increase up to $500000. A property appraiser will do the exact resale valuation.
As for the tangible assets, their values always depreciate with each year. A car model priced at $1.2 million this year will be available at $1 million the next year. This is why tangible assets are related to depreciation tax.
Assessment of the tax
How the real and the tangible assets are assessed is different. For instance, a real property valuation is based on the market price. In some states, the entire market price is considered in valuation, while in some, only a percentage of the market price is considered.
However, for the tangible assets, its market value is considered entirely for the valuation assessment. This is why selling the tangible assets will never bring you a ludicrous deal as their values suffer depreciation over time.
Tax exemptions
If you are looking to reduce the total tax amount for the real property, you can look for the exemptions since these will offer you a huge amount of discounts on your total taxation amount. The exemptions can be availed only if you meet the requirement. A property appraiser will help you in this section since they are more acquitted with the tax exemptions and reduction procedure in various counties, including Charlotte county.
As for the tangible assets, not such options are present for exempting the total value. This is one of the biggest drawbacks of tangible assets.
F.A.Qs
It’s not easy to differentiate between tangible and real properties. The real properties are always related to land and any other structure constructed on the concerned land. As for the tangible assets, the items are usually movable from one point to the other, like the electronics present inside the house, the car you own, the clothes you wear, and so on.
No, all the tangible properties are not taxed. In the US, some laws state that tangible assets needed for the survival of the species wouldn’t fall under the taxation group. However, things like alcohol and drugs aren’t necessary for survival, and hence they are taxed.
No house is considered to be a real asset since it is connected to the land. However, the things present inside the house, like the furniture units, the appliances, and others, are all tangible assets. These are known as the fixtures, and you can easily move them from one place to another, unlike the entire house structure.