In a recent article, we discussed several ways to chop down the rising property taxes on your personal residence. (5/30/05 issue) But escalating property taxes aren't limited to homeowners. Small business owners are getting socked lately as the value of their business property has gone up, too.
Small business owners polled by the National Federation of Independent Business (NFIB) ranked property taxes as the sixth biggest problem they face today. Nearly a quarter (23 percent) considered the issue a "critical" problem.
While property taxes are reality, NFIB suggests the following five ways to lighten your tax load:
1. Avoid keeping surplus inventory on hand. While you'll need enough stock to fill customer requests, excess inventory will only cost you more tax.
2. Buy assets next year instead of this year. Since most states tax "tangible" personal property (such as inventory) on the last day of the year, put off some purchases until next year.
3. Don't get taxed for anything you no longer own. If you've sold, donated or gotten rid of major equipment lately, notify state and local taxing authorities and make sure you're not being taxed on it anymore.
4. Obtain an itemized bill when buying equipment or other major assets. Many localities don't tax "intangible" costs (e.g., patents and copyrights) that are included in the equipment price. In most cases, you pay tax only on tangible property.
5. Think twice before making major renovations. Upgrading your property could result in a huge increase in your property taxes. So before you do the work, obtain an estimate on how it would affect your property value and taxes. Consider all the angles, including any tax breaks that you might qualify for, such as the rehabilitation tax credit.
Too often, business owners accept tax bills as final and hand over the money without a whimper. But you can cut down property tax bills to size by making these few simple moves between now and year-end. And remember that property taxes often include more than just the tax assessed on your business premises.
Final note: When you hear that lawmakers are lowering taxes in your area, look at the details. State lawmakers often promise that they won't raise personal income taxes. But when states look for revenue, they seek out other taxes, often including the "hidden" taxes assessed on businesses.