Real Property Tax Calculation

Buildings

Real estate assessments for buildings and improvements are determined by using the rules of the Department of Local Government Finance. Assessments are based on fair market value in use, which is usually somewhat less than market value on new construction. However, cost as well as market comparisons can be used to make a reasonable estimate of value.

• Tax Formula: Cost x net tax rate

Land

The assessed value of land is the cost or value of the land, as it is currently used.

• Tax Formula: Cost x net tax rate

Personal Property Tax Calculation

Depreciable Personal Property

The assessed value for depreciable personal property (machinery, equipment and office furniture) is multiplied by a percentage based on the life of the asset. Straight line depreciation procedures are used.

• Tax Formula: Cost x depreciated % x net tax rate

Inventory

Inventory, which consists of raw materials, work-in-progress and finished goods, is currently taxed as personal property in Indiana. Inventory destined for out-of-state shipment and work-in-progress may be exempt. Hendricks and Morgan counties have already eliminated the inventory tax. All other counties will eliminate the inventory tax in the 2006 payable 2007.

• Tax Formula: Cost (Indiana portion of inventory) – 35% x net tax rate

* In tax tear 2006 payable 2007, the inventory tax is completely eliminated. *

Special Tools

Special tools are property such as tools, dies, molds, jigs and patterns used for the production of specific products or product models. The usefulness of special tools ceases with the modification or discontinuation of the product or product model. The assessed value of special tools purchased in the previous twelve months is 76% of cost, while all other special tools on hand are valued at 53% of cost.

• Tax Formula: Cost x depreciation% (1st yr. 42%, 2nd yr. 14%, 3rd yr. or more 2%) x net tax rate

Personal Property Not Placed in Service

Personal property not placed in service as of the assessment date (such as construction in progress) qualifies as a special valuation item. The assessed value of personal property not placed in service is 10% of cost.

• Tax Formula: Cost x .10 x net tax rate