Property tax: A fixed expense?

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Many businesses categorize property taxes as an operational fixed expense. And although property taxes have the propensity to be time related, there is more to them than just a yearly due date. Did you know that you have the authority to challenge excessive property values and reduce the amount of your fixed expense? Here are a few tips to help you ensure you are paying the correct amount of property tax liability.

Understand ownership transfer laws

If you are looking to acquire assets, particularly real estate, it is important to understand the laws applicable to ownership transfer and its impact on assessments. Some taxpayers experience unexpected increases in property tax liability — uncapping laws can result in a significant impact on taxes. Having an understanding of the law and the market allows you to make more confident buying decisions and prepare for future property tax expenses.

Properly classify new assets

New assets entering your organization should be evaluated to determine their proper classification. Categorizing your assets is essential to ensuring minimum property tax liability — regardless if it is real or personal, or taxable or non-taxable.

Review your fixed assets on an annual basis

Like any other expense, an annual review of personal property tax is important. Whether through a fixed asset inventory assessment (applicable for property tax or many other control requirements) or a discussion with knowledgeable resources, it is critical to ensure the accuracy of what you own. Review the location of your assets and update records that encounter full or partial disposals.

Remove disposed assets from fixed asset records

A major issue for many taxpayers is not accurately communicating that assets have moved from the organization. One of the main reasons is ineffective documentation processes — beginning with the already lean resources that utilize the assets, to the accounting department who is responsible for reporting. Implementing effective processes to enhance communication between departments is key to accurately reflecting disposals.

Take advantage of exemptions

Exemptions are available for both real and personal property, which can partially or fully reduce the value or millage rates that directly impact property tax liability. There are programs to assist taxpayers regardless if the asset value is below certain thresholds, if there is a particular asset functionality, or a benefit to the community.

Review assessments for accuracy

We all receive a notice of proposed property tax assessment, Truth in Millage (TRIM) notices in the mail that frequently state, “This is not a tax bill.” We are often so distracted by other responsibilities that we place the notice on the back burner to review when we have more time. Months later, we receive a tax bill and are surprised at what we owe. At this point, we have no choice but to pay the property tax liability. Just as you visit the doctor for an annual checkup, get in the habit of consistently reviewing your notice for accuracy. If you are not sure how to interpret the value, ask your state and local tax (SALT) professional.

Know your rights

Every taxpayer has rights, but unfortunately many are unaware. You have the right to protest decisions and assess the true value of your property. Engaging your rights should not be considered contentious — knowing and understanding your rights will provide you with the information you need to make informed tax decisions. Keep in mind, rights have critical deadlines to pay particular attention to. By knowing your rights and their appropriate deadlines, effective change in property tax liability can occur.

Published in Tax

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