How Do Equipment Purchases Impact Personal Property Taxes?

How Do Equipment Purchases Impact Personal Property Taxes?

Are you considering purchasing equipment for your business? Adding new equipment to your lineup can be a great way to increase profitability and productivity, but you need to be aware of potential personal property taxes. In this article, we’ll explore how personal property taxes are calculated and the impact of buying new equipment.

How are Personal Property Taxes Calculated?

Personal property taxes are a tax assessed on the value of certain property. Common items that are charged personal property taxes include software, office furniture and fixtures, leasehold equipment, vehicles, and machinery. There are some exemptions based on your state, such as specific types of machinery and equipment. In addition, your industry might give way to an exemption, as certain manufacturers, and some small businesses are exempt.

There are only a handful of states that charge business owners personal property taxes on their assets. However, states are constantly changing their regulations surrounding business taxation, so be sure to double check with your state before you purchase new machinery or equipment. Furthermore, the average personal property tax rate is generally minimal, especially with the growing amount of exempt items.

Comparing Taxes to Profitability

Buying both new and used equipment can impact your personal property taxes. However, before you get too scared off, it’s important to consider the profitability potential that new and used equipment can provide. How would a new piece of equipment benefit your business? Would employees be less stressed? Would you now have the capacity to take on an additional 10 projects each month?

When it comes to purchasing equipment, whether it be new or used, it’s important to consider the positive impact it can have on your business, not just the potential tax implications. Additionally, adding machinery and equipment to your business can give you access to significant tax breaks through special depreciation options. All of these factors make personal property taxes immaterial in the big picture.

Not to mention that most states don’t impose any personal property taxes on manufacturing items. Currently, only a dozen or so states have provisions in place. Depending on where your business is located, personal property taxes might not be a concern. Regardless, it’s still important to consider the added benefits that purchasing new and used machinery can have on your operations and profitability.

About IMS Supply: IMS Supply is a leading distributor of maintenance, repair and operations (MRO) products and services with facilities in East and West Michigan and Kentucky. Through our MRO Asset Recovery Program we stock hard to find parts and supplies from thousands of different manufacturers at prices up to 70% less than MSRP. Contact us today to find out how we can help your business.