Ever had a toothache? It’s painful and annoying! I am currently having one… probably a filling from my childhood that needs to be replaced. Going to the dentist to get it fixed is a low priority, not my favorite way to spend time (sorry Dr. Bill). However, it always feels better after I go.
Conducting an analysis of your fixed assets can feel like a toothache – somewhere between mildly annoying and downright painful! But it usually results in significant property tax savings. Much of this comes from older assets that have been physically disposed of but not written off the books. Let’s say you have an asset fitting this description with an original cost of $100k. Depending on the tax rate, you are probably paying $400 to $800 in property taxes for that asset. There’s a reason to clean up your fixed assets.
Now there’s another reason to clean up your fixed assets, at least in Harris County, Texas. Harris County is giving taxpayers an incentive of sorts (although they aren’t calling it that). They have adopted NAM (“new asset mix”), which is “an obsolescence factor that is applied when most of the assets in a category are newer”. They are allowing between 5-18% more in the depreciation of your newer assets if those assets make up more than 50% of your total asset base.
By removing older assets that are still on your books (but not physically present), not only do you save property taxes on those assets, you may also save property taxes on your newer assets by shifting your total asset mix. Much like going to the dentist, you might dread the thought of conducting a fixed asset study…. but you’ll be glad you did it.