Property tax is generally calculated by multiplying “Original Cost” x “Percent Good Factor” to get Fair Market Value. This value is then multiplied by the effective tax rate to arrive at the amount of property tax due. The Percent Good Factor can range greatly in the first year – from 60% on short life equipment to 95% for long life machinery. Effective tax rates can also vary greatly so you will want to look at last year’s tax bill for the location that the equipment was purchased at. If situs is unknown, use an average effective tax rate of roughly 2%.
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