CPA Blog

CPA & Accounting Topics for Business

The Dreaded Property Taxes

You hear it over and over again. Texas politicians entice employers to the state claiming we don't have a state income tax. Any experienced small business person knows this statement isn't completely true. All corporate entities have to file a state income tax return. But individuals don't pay any income tax in Texas. But we all pay the dreaded property tax.

Property tax rates vary from location to location. In the Houston area, property tax rates exceed 3% of the property value. That adds up really quickly when you consider they are taxing not only your land and buildings but your equipment, vehicles, machines, inventory, furniture and fixtures.

Different Types of Property for Businesses

 

There are two different types of property, "Real Property" and "Business Personal". These terms are confusing but basically "real property" is land and buildings" and "business personal property" is inventory, equipment, furniture, fixtures, and vehicles. These items are all subject to property tax.

Real property (land, building, houses) is taxed without you having to initiate anything. The county appraisal district has a process by which they value your real property and there is a very defined appeals process if you disagree with the value.

But business personal property (inventory, equipment, vehicles, machines, furniture and fixtures, etc.) is not as easy to value because.....

You Have to File a Rendition

State law requires all businesses file a property tax rendition declaring the value of all "business personal property" owned by the business. If you don't file your rendition on time or at all, a penalty equal to 10% of the amount of taxes on the property will be imposed. Make sure you do the right thing and declare everything. The penalty for filing a fraudulent rendition is equal to 50% of the appraised value and it is a criminal act under the law. If you don't file a rendition, in our experience, the appraisal district generally assesses you a value that is much higher than your value would have been and you end up paying more taxes with a 10% penalty.

With school districts and counties getting less money than what they received prior to the crash of 2008 and 2009, appraisal districts are much more aggressive about assessing and collecting taxes.

So How do I Keep my Property Tax Low?

We can help with Business Personal Property taxes.

For our clients, we can prepare your "Business Personal Property Tax Renditions" because we have virtually all of the information in the accounting records. The cost of us preparing the returns is small compared to the penalties and lost time you will spend battling with your local appraisal district.

For Real Property (houses, land, buildings), I recommend that you hire a property tax firm to protest your valuation each year. You probably get a solicitation from these types of firms every May. They typically have a system by which they can protest your property tax valuation and they will keep your valuations in line.

Don't Ignore this Boring Tax Stuff

Most small business people hate this boring tax stuff. But property taxes are not going away so don't ignore them.

We will prepare your "Business Personal Property Tax Rendition" for you. To prepare your return, we need all of the forms you have received from the appraisal district. So get them to us now!!!!

But remember, your Property Tax Renditions are due on April 16, 2012.

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