Equipment Appraisal Blog | Understanding Machinery Appraisals

Property Tax Assessments on Vehicles & Equipment; Are They Reasonable?

Posted by Equipment Appraisal Services on Mon, Sep 19, 2022 @ 07:30 AM


Machinery and Equipment Appraisals Property Tax Disputes

Whether you own a small business or are personally responsible for paying property taxes on your vehicles and equipment, you have likely questioned the validity of the value assessment assigned to these assets on a year-to-year basis. You look back at when they were purchased and how old they are, and try and determine if the numbers make sense in the context of actual market prices.

If you own a significant amount of furniture, fixtures, and equipment (FF&E) or vehicles, where the annual tax liability is substantial, you may have entertained the idea of disputing these estimates while looking to have the assessment adjusted to match your own internally calculated figures. Property tax disputes are not uncommon, however, if you go down this road, you will likely need independent support to present a sound case where the end result is fair and reasonable.

How are property taxes calculated on vehicles and equipment?

Unlike real estate taxes, where reassessments are completed by counties, cities, and towns every few years, based on an updated market analysis, assessments on vehicles and equipment rarely change from their initial estimates.

The purchase price and date of acquisition are the starting point where the assessor then determines a useful life and annual depreciation schedule matching the type of asset that is involved. For example, if you bought a new pickup truck for $40,000 this year, you pay property tax based on this initial cost, and again every year, under an internally calculated useful life depreciation table created by the assessor’s office. The useful life may be estimated at 10 years with annual depreciation of 6% to a salvage value of 40%. If you still own the truck after 10 years, the assessor may slow the depreciation even further going forward.

Every city and town has its own mill rate percentages which are applied to arrive at your tax payment, and cannot be disputed. The value estimate, however, is the area to target in any case where you believe it does not equate to market value. These assessments are usually calculated on very broad assumptions, while the depreciation is slow and on a straight-line basis. The salvage value estimates can tend to be quite high in comparison to fair market value

If you believe your property tax assessments are much higher than the actual market value, you can file a dispute, and even have it done retroactively, to cover prior tax periods in earlier years. It’s always a good idea to complete a detailed internal assessment first, and then reach out to an accredited appraiser who can independently perform an appraisal on your vehicles and equipment. The more prepared you are throughout the dispute process, the better chance you have of a fair and successful outcome.

Tags: accredited appraisers, Property Tax Appeal Valuation, Machinery & Equipment Appraisals

Fair Market Value (FMV) vs. Actual Cash Value (ACV)

Posted by Equipment Appraisal Services on Tue, Sep 06, 2022 @ 07:30 AM


Fair Market Value Actual Cash Value Machinery Equipment Appraisals Insurance

When it comes to estimating the value of personal property and equipment, there are a number of premises, terms, and definitions thrown around in the professional appraisal realm, as well as areas such as insurance loss claims

Fair Market Value is the most frequently referenced when it comes to appraisers, however, insurance adjustors are tied to a less common term called Actual Cash Value.

Although you might think these two should be similar in their approach, they can be quite different, depending on the type of property being valued and the interpretation of their meaning.

As a direct comparison, here are the most often seen definitions:

Fair Market Value is an opinion expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date.

Actual Cash Value is the amount equal to the replacement cost (new) minus depreciation of a property at the time of loss. The actual value for which the property could be sold is always less than what it would cost to replace it.

Given there is generally room for interpretation with both of these definitions, there are times when appraisers and insurance adjustors can arrive at a very similar value and other times when there is a significant discrepancy between the two.

What approaches are utilized, and which data sources are relied upon will determine whether these values are comparable or far apart. How independent agencies measure useful life along with annual levels of depreciation, and whether they rely on direct market information or broader industry data can create any number of diverging estimates of value.

Before you select an appraiser or engage with an insurance company to protect your personal property and equipment, it is important to understand the company’s background and history with how they treat these approaches to value. Accredited appraisers have guidelines and quality controls in place by which they abide, while insurance companies will have their own internal methodologies based on past experience and actuarial data.

Regardless of these requirements, there will always be a subjective component to the concept of valuation with every business in both the appraisal and insurance industries. Seek to learn as much as you can about this topic so you can feel comfortable that the service being provided is the one that’s right for you.

Tags: actual cash value, fair market value, ASA accredited appraiser, Machinery & Equipment Appraisals, insurance