If I lease a vehicle that I use for personal purposes, do I have to pay property taxes on the vehicle?

In Texas, all property is taxable, unless exempt by state or federal law. Leased vehicles produce income for the leasing company and are taxable to the leasing company. In many leasing contracts, companies require their lessees to reimburse them for taxes assessed on the vehicles.

Texas does exempt leased vehicles that are not held for the primary purpose of income production by the lessee. These vehicles include passenger cars or trucks with a shipping weight of not more than 9,000 pounds and leased for personal use. Personal use would mean using the vehicle more than 50 percent of its use (based on mileage) for activities that do not involve the production of income. The exemption applies only to vehicles subject to a lease entered on or after Jan. 2, 2001. Any leased vehicles contracted before Jan. 2, 2001 would continue to be taxed. In addition, cities that passed an ordinance before Jan. 1, 2002, could opt to tax personal leased vehicles. The law was effective on Jan. 1, 2002.

To qualify for the exemption, you must timely file an affidavit with the leasing company. You may print the Lessee’s Affidavit of Primarily Non Income Producing Vehicle Use form now or it is available from the leasing company.

To receive the exemption, the leasing company must file a Lessor’s Application for Personal Use Lease Automobile Exemptions application with the county appraisal district where the property is located before April 30 of each year. The exemption application should contain all vehicles that are used primarily for personal use. If the leasing company does not file the application timely, the vehicle is not exempt for that year.

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