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.

When you're dealing with a local tax agency over the value of your property, it can be a frustrating experience. Fortunately, there's one tool you can bring to bear that will prove the worth of your equipment assets beyond any other: equipment valuation. By having a property tax appeals appraisal performed on your machinery, you'll have an independent source verifying the value of your equipment. Here's a look at how the process works and how it backs up the value of your equipment.

How a Property Tax Appeals Appraisal Helps You Win!

Equipment values can be estimated in several different ways, and tax assessors may or may not be using an appropriate method to determine your tax liability on that equipment. In many cases, tax assessors are dealing with a very wide range of property when they're trying to determine value. Homes, boats, cars, business structures, machinery, livestock: these are all property that a tax assessor must attempt to determine value on. They don't specialize in any one area, so it can be very difficult to accurately determine value with the sheer variety of assets they must assess.

An equipment appraiser, on the other hand, tends to specialize in specific types of equipment, and only equipment. This puts them in a much better position to determine the value of your machinery. They have a much better grasp of the nuances between types of injection molding machinery or metal presses, as an example. This means that they know that the machine that you're using in your business is worth more or less than the one being used at a similar facility a half mile away. 

They're also well practiced in calculating value. When a certified appraiser goes through the certification process, they're being taught a range of different methods to calculate value. This education ensures that they know which methodology to use in which situation, so your equipment is being properly valued when they work through the process. The final calculation provides a solid basis for value.

But why are these methodologies so much better than the ones your tax assessor uses? Because valuation is the appraiser's business, they use methodologies that have already been tested in a wide range of real-world situations. In financial circles, insurance claims, court cases and tax appeals, these methodologies have been put to the test time and time again and have come out ahead. Because they've been through this process, equipment appraisals that are performed using these methodologies are viewed in a favorable light in these circles. This ensures that your appraisal will help you prove value and win your appeal quickly.

By having a property tax appeals appraisal performed on your equipment, you can quickly prove the exact value of your equipment without having to spend a lot of time arguing with the tax board. However, these benefits only apply if you're working with a certified equipment appraiser, because the methodologies, experience and education mentioned above are taught during their certification process. If you're not sure whether the appraiser you're considering working with is certified or not, take a few minutes to ask about what their professional certifications and qualifications are to ensure you're hiring the right person for the job.