Accounting for Agriculture: Personal Property Tax Relief Act
With the change in equipment trades under the new tax law, many Nebraskans have caught on to a potential implication. With the 1031 Like-Kind Exchange no longer available for equipment, the basis on the depreciation schedule for newly purchased assets after trade-in will be higher. If the basis is higher, will personal property taxes increase? For the moment, the answer is yes, though legislators are current debating how the taxing system should evolve and their response may affect this. Another law also could help. While everyone is using the Personal Property Tax Relief Act, but may not be taking full advantage of potential savings opportunities.
Personal Property Tax Relief Act
The Personal Property Tax Relief Act went into effect in 2016. Nebraska revised statutes 77-1237 to 1239 exempt the first $10,000 of tangible personal property value for each tax district in which a personal property return is filed by the deadline. Upon first reading, you may not catch the keyword. Most individuals file one personal property return with their county assessor, but it’s possible they should be filing more. Under the act, the exemption is for each tax district. To put it another way, if you have equipment stored in District 42 and equipment stored in District 68, you should file two returns, not one.
What Can You Gain?
For simplicity let's say a grower has $55,000 of personal property value. Every district in the county charges the same tax rate at 1.554710. The grower also has equipment at various values in several locations: District 1 $20,000, District 2 $30,000, and District 3 $5,000. What can be gained by filing three personal property returns, one for each district, instead of one? Consider the following example (Table 1).
| One Personal Property tax Return | Three Personal Property tax Returns | |||
|---|---|---|---|---|
| Personal Property Value | $55,000 | Dist 1: $20,000 |
Dist 2: $30,000 |
Dist 3: $5,000 |
| Exemption | - $10,000 | - $10,000 | -$10,000 | - $10,000 |
| Taxable Value | $45,000 | $10,000 | $20,000 | $0 |
| Tax Rate | 1.554710 | 1.554710 | 1.554710 | 1.554710 |
| $155.47 | $310.94 | $0 | ||
| Total Tax Due | $699.62 | $466.41 | ||
Key Factors
For those who store depreciable, tangible personal property in multiple locations, taking time to report each district can be beneficial. If you are wondering about using this method, here are some key takeaways.
First, figure out what tax districts you operate in. This is not the same as your school district. If you are unsure, you can check your tax statement or contact your local county assessor.
Second, take your list of depreciable tangible personal property and divide it by district according to where the personal property has situs. “Situs” is defined as the place to which, for purposes of legal jurisdiction or taxation, a property belongs.
Finally, once your list is completed, file a Nebraska Personal Property Return for each district.
If you have questions about using this method, contact the author, Austin Duerfeldt, or your local county assessor.
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