Personal property can be defined as property that is tangible but is not true property. In the state of Texas, the general basis for differentiating between personal property and true property is whether or not it is attached to the true property.
Take a refrigerator for example. A refrigerator is not generally considered to be attached to the true property. That said, vinyl tile, carpet, plumbing fixtures, light fixtures, etc. would be considered as being attached to the property. Personal property that is not used in the generation of income is not allowed to be taxed in Texas.
Real Property vs Personal Property
When talking about business personal property in Texas, it can be defined as any type of tangible personal property that is utilized to generate any form of income. This type of property is eligible to be taxed at the same rate as true real estate property. Some more common examples of this type of property are things like cars, trucks, heavy equipment, office furniture, office equipment and inventory.
- The main difference between the two types of property is that one type is used to generate income while the other is not.
- Business personal property is only a tangible thing that is used for business purposes or is used to generate income. So things like flights, lunches for or with clients, bosses etc. are not really tangible things even though they are used for business purposes. This means that they are not business personal property. Alternatively, things like the cell phone that you use for business purposes, the laptop that you use for your drop shipping online store or your freelance job, the vehicle that gets you to job sites…all of these things can be claimed as business personal property. These things are taxable at the same rate as real property. The same things, when used only for personal use, they cannot be taxed at all in the state of Texas.
- Business personal property is things that can be moved and are not attached to real property. Real property is the land and what is on it. For example, if I have 20 acres of land and I build a house or other structure on it and I park my car on the land, the land and the structure are considered to be real property. The car, on the other hand, is not because it can be taken off the land.
- Real property can be used for personal use or business use and it will still be taxed at the same rate either way. Business personal property is taxed at the same rate as real property. The difference here is that the business personal property can only be taxed IF it is tangible AND used to generate income while real property is taxed either way.
- Business personal property can actually be used to bring your taxes down even though they are taxable. Real property can’t really achieve that without you having to jump through a lot of hoops to get there.
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