Companies that operate in the United States or companies that have tangible business personal property in the state must pay annual property tax returns. These returns include listing the year the BPP was acquired and the first cost of the asset. Many people are not aware of the fact that taxes on business assets are paid every year as long as the asset is in use apart from the company’s book depreciation. The local taxing authorities have the right to decide on the value of the property tax return. The value depends on the assets category and the local taxing authorities’ depreciation schedule. The return is assessed a taxable value which is later applied to the tax rates specific to the street address in order to result in an annual BPP tax due. Now that we have got an overview of tangible personal properties let us take a look at the top five mistakes property taxpayers should avoid.

Top five mistakes property taxpayers should avoid

Filing a property tax return starts off with a company’s fixed asset listing. This means the assets that are physically located as of this date should be listed for the returns. There are a lot of difficulties that could be experienced. However, here are a few common mistakes that a filer can avoid.

Ghost assets

Ghost assets generally refer to those assets that are shown in the company’s asset listing but are not really physically present. Ghost assets if not removed from the fixed asset register can result in additional property taxes. Another point to remember is the equipment on return does not depreciate completely but only up to a certain level which is applied as long as the asset is in its location. This means even if the asset has dollar zero as the book value, the asset will always have a value for property taxes in the eye of an assessor; hence you will always have to pay property tax on the asset. It is always good to start off by reviewing the top dollar assets based on the first cost and old assets based on the year it was acquired.

Asset classification

Assets listed on the tax return are to be listed below a particular category as per the instruction of the assessor. At times, tax filers completely rely on the category from the fixed asset listing. But, by doing it that way, there are chances for mistakes. When an improper depreciation schedule is applied it might result in errors in the value of the asset. For an equitable valuation, it is necessary to cross-check if the assets are properly classified as per that particular category’s depreciation table. Some special categories to evaluate are R&D equipment, high-tech equipment, manufacturing machinery, etc.


If the equipment is to be directly listed from the register, there comes the risk of overstating the value and hence the property taxes. A property tax return provides most of the information with regards to what and where to list on the return. Online tools provide an additional layer of security confirming what is taxable and what is not.

It is important to understand the difference between a non-taxable property and an exempt property. A non-taxable property is one that is not taxable by nature whereas an exempt property is something that is taxable by nature but tax exemptions exist based on certain qualifications. One such example is a freeport inventory. A few states tax inventory and in these states a freeport exemption is likely to be offered. This exemption could either exempt all or a certain amount of the qualifying property. Taking Texas for an example, if an inventory comes into Texas and moves out within 175 days then the inventory might receive exemptions. If the company has a distribution center in the state then this helps in reducing the tax liability.

Cost basis

On the majority, most property tax returns state cost first. However, few jurisdictions utilize book value first. There is a common misconception that book value is the go-to value but assets are valued by the assessors based on the first cost multiplied with the depreciation factor specific to that asset in most jurisdictions.

Real or personal

One of the major mistakes is not to review a fixed asset listing for real vs personal property. Real property includes land and building whereas personal property includes all tangible assets. Assessors value real property through 3 approaches. Personal property is required to be listed every year. However, it is not the same for a real estate listing. Reviewing the asset classification is considered a proven method to reduce the potential of over-assessment.

Always review your property tax bills and make sure the values are consistent. O’Connor’s team of professionals possesses the resources and unparalleled market expertise in the areas of property tax, cost segregation, and commercial and residential real estate appraisals.