We are always on the lookout for deductions that self-employed individuals can take advantage of, and today we’d like to highlight another tax-savings opportunity: the personal property tax deduction. Here we’ll discuss what personal property taxes are, what is deductible and how to file. Let’s get started.
What is a Personal Property Tax?
A personal property tax (i.e., an ad valorem tax) is a tax levied by state or local governments on your personal property, such as your car, boat or motorcycle. These taxes are different than the ones you pay on your house, land and other real estate that you own. The important thing to note is that while these are locally imposed taxes, you can deduct your personal property taxes on your federal tax returns.
What Can Be Deducted as Personal Property Tax?
The IRS defines personal property as any "movable" property, so think cars, planes, boats, RVs and motorcycles. Again, these taxes are completely separate from those levied on any real estate you own.
How Filing Personal Property Tax Returns Vary By State
Because personal property taxes are levied by state and local governments, they can vary pretty widely by county, city and/or state. For a breakdown of how personal property taxes operate in your state, check out this handy guide from Bankrate.
How to Claim a Deduction for Personal Property Taxes
Individuals must meet certain requirements in order to claim a personal property tax deduction. First, your local and state personal property taxes must meet IRS rules. Those are:
- The tax must be an ad valorem tax based on the value of the property.
- The tax must be imposed annually.
- The tax must be imposed on personal property.
Secondly, you must be eligible to itemize your deductions. To determine if you qualify to itemize, add up your eligible itemized deductions for the year. This may include:
- medical expenses
- charitable contributions
- mortgage interest payments.
- Etc.
Once you add all those up, if the total is more than the standard deduction, then you’re good to itemize and move forward with the personal property tax deduction. Note, however, that you should only claim the personal property tax deduction if the total of your itemized deductions exceeds the amount of your standard deduction (The standard deduction for 2023 is $13,850 for single taxpayers and married individuals who file separate returns; $20,800 for a head of household; and $27,700 for those who are married and file joint returns.).
If you qualify, you can deduct your personal property taxes as an itemized deduction on Line 7 of your Schedule A of your federal tax returns. However, there is some bad-ish news: the so-called ‘SALT’ deduction used to be unlimited -- until the Tax Cuts and Jobs Act came along, imposing an annual cap of $10,000. The $10,000 cap also includes deductions for state income tax (or sales tax paid, if you live in a no income tax state) and real estate property taxes.
Married taxpayers who file separate returns are limited to $5,000. Sad face emoji.
What is Not Deductible as Personal Property Tax?
As mentioned, real estate, such as land and buildings you own, is not the same as your personal property taxes. However, both personal property and real estate taxes, as well as state and local income taxes, are combined together in the SALT deduction, which is capped at $10,000 for tax years 2017 and beyond.
Here Are 16 Real Estate Agent Tax Deductions
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Gig Economy Delivery Jobs Like Postmates
Delivery jobs vary in their specific functions, but they all allow independent contractors like yourself to travel, create a flexible schedule, and deliver goods (as opposed to passengers). Jobs like Postmates give you the ability to work short gigs during times like your lunch break or at night, while others like Roadie allow you to use space in your car for somewhere you are already going to deliver a package.
Unskilled On Demand Jobs
If you’re looking to help someone out and make some quick cash, then this section is for you. These companies function as automatic lead generators: instead of finding gigs by yourself, these companies give you the gigs. If you enjoy working with people and assisting them with their problems, many of the companies listed allow you to do just that.
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Rideshare Companies With Jobs Like Uber
As an independent contractor, driving for an on demand economy company gives you the ability make money with your extra time. Drive during your lunch break, at night, or during busy weekends – it’s up to you. However, these companies don’t only provide taxi-style services; companies like HopSkipDrive enable the driver to chauffeur kids to their activities around town, similar to a nanny. Other rideshare companies allow the individual to use their vehicle to make extra cash by renting it out or sharing a ride to work. If you have a car, then there’s an on demand economy opportunity out there for you.
Sites Like Airbnb
Make money off renting out your home, car, boat, tools, or almost anything with these sites like Airbnb. If you are out of town, make money while you are away. If you have free space in a home you live in, you can leverage that too. You can also choose specifically who you would like to rent to – say, a college sports fan. Check these hosting companies out below.
Delivery Jobs Like Postmates
Delivery jobs vary in their specific functions, but they all allow independent contractors like yourself to travel, create a flexible schedule, and deliver goods (as opposed to passengers). Jobs like Postmates give you the ability to work short gigs during times like your lunch break or at night, while others like Roadie allow you to use space in your car for somewhere you are already going to deliver a package.
Unskilled On Demand Jobs
If you’re looking to help someone out and make some quick cash, then this section is for you. These companies function as automatic lead generators: instead of finding gigs by yourself, these companies give you the gigs. If you enjoy working with people and assisting them with their problems, many of the companies listed allow you to do just that.
Freelance On Demand Jobs
Freelancing allows individuals to work wherever they want, whenever they want, with whoever they want. Freelance occupations range from bloggers, lawyers, chefs, stylits, caregivers, techies, and many more. If you like the freedom to travel and be your own boss, check out the companies below.