Courtesy photo of Michael D. Bosma
Note that if a business fails to file a personal property return, the Washoe County appraiser will make an estimate of the assessed value of the property. Even if a company does not own any property, it is still required to submit a declaration stating it.
The assessed value of an asset is determined based on the type of asset, the amount paid for the asset and the year of commissioning. The assessed value is reduced by a legal depreciation amount each year.
With that in mind, here are five common mistakes taxpayers make that lead to overpayment of property tax:
1. Declare the wrong cost of the equipment
Many taxpayers report the same amount on their personal property return as on their tax depreciation schedules.
The cost amount stated on your personal property return should be reduced by certain adjustments, including sales tax paid when purchasing the items.
2. Report assets that are no longer in service
Property does not fully write off for personal property tax, regardless of age. Even though the assessed value is reduced each year for depreciation, there is a residual amount that remains on the return and is taxed each year – unless removed by the taxpayer.
If an asset has been retired from service in your business, make sure that it is also removed from the personal property return. If you have a 1998 computer, chances are it was thrown away years ago. Remove it from the return and save two dollars in taxes.
3. Selecting incorrect lifetimes for assets
As part of the declaration, you must select the appropriate asset class for each property. If the wrong asset class is selected, the property may depreciate more slowly than it should, resulting in a higher assessed value than it should.
Correct lives can be found in the Nevada Personal Property Tax Manual;
Pay close attention to industry life expectancy guidelines. Most industries have short-lived categories. Are you taking advantage of these?
4. Declare assets exempt from property tax
The assets that must be declared on the return are all assets that are not âreal propertyâ or âreal propertyâ. Whether an item is considered personal property or part of real estate can sometimes be confusing.
Generally speaking, if an item is permanently attached to or permanently rests on land or an improvement, and it cannot be removed without substantially damaging the item or land, then it is considered an accessory that does not. is not included in personal property.
In addition, a property that is not permanently attached to the land is considered an accessory if it is an integral, necessary or useful part of the improvement of the land; designed or intended for use in land improvement; or so essential to the improvement of the land that the land or improvement cannot perform the desired function without the item not attached.
For federal depreciation purposes, many devices are listed as tangible personal property. Don’t make the mistake of including them on your personal property declaration. If you do, you will be paying the tax twice as they are often included in the property tax assessment.
This is always the case if you have prepared a cost segregation study to take bonuses or accelerated depreciation on your property.
5. Don’t adjust for assets that have lost value
If the property, or the whole business, has a fair market
For example, if you owned a restaurant that was wiped out by COVID and the pandemic is having a lasting negative impact on your business, you may be entitled to a reduction on both actual and personal property taxes.
Make sure you have a fresh look at your personal property return to make sure you’re not paying too much tax. Also, be aware that you can request an extension of time to file the form.
Please note that this article is not designed to answer specific questions. Contact your tax advisor for details on your specific situation.
Michael D. Bosma, CPA, is Senior Director of Keystone CPA. His NNBW monthly column, âCovering Your Assets,â focuses on effective planning strategies for every business owner. Contact him to comment at