There are two basic categories of property: real and personal. The assessment procedures and the tax rate will vary between these two categories. Real property, in general, is land and anything permanently affixed to land (e.g. wells or buildings). Structures such as homes, apartments, offices, and commercial buildings (and the land to which they are attached) are typical examples of real property.
Basically, personal property is any property that is not real property. Personal property is not permanently attached to land. In most cases, it is moveable and does not last as long as real property. It comprises nearly everything that is perceptible to the senses. Personal property includes vehicles, farm equipment, jewelry, household goods, stocks, and bonds.
Personal property is divided into “tangible” and “intangible” forms. Tangible personal property is just that: it has a physical form. It can be seen, touched, and moved. Examples of tangible personal property include clothing, books, and computers. On the other hand, the notion of intangible personal property is an abstraction. They do not have physical forms. These include assets such as patents, trademarks, stocks, and bonds.
In addition to the basic types of property, property is grouped into various classes and subclasses for purposes of tax assessment. These classes are based on the use of the property. These schedules of classes vary considerably from state to state. For example, a state may have the following classes of property:
- Class 1. Agriculture, grazing, livestock, notes, bonds, stocks, accounts receivable
- Class 2: Commercial properties
- Class 3: Motor vehicles
- Class 4: Personal property, except motor vehicles
- Class 5: Residential, farm homes
- Class 6: Swamp and waste
Property classification according to various uses or types serves as a basis for adjusting the rate of tax.