In Texas, leased
vehicles are generally not subject to property taxes, unless they are used primarily for
income-generating purposes. While Texas law assumes that all property is
taxable unless specifically exempt, leased vehicles used mainly for personal
purposes qualify for an important exemption.
Leased vehicles such as passenger cars or light trucks
(with a shipping weight under 9,000 pounds) are exempt from property taxes if
they are used more than 50% for personal, non-income-producing activities.
This includes everyday use such as commuting, family travel, and personal
errands. However, this exemption applies only to lease agreements entered into
on or after January 2, 2001. Vehicles leased before this date may still
be subject to taxation. Additionally, certain cities that passed ordinances
before January 1, 2002, may continue to tax personal-use leased vehicles.
To qualify for
the exemption, the lessee must submit a Lessee’s Affidavit of Primarily
Non-Income Producing Vehicle Use to the leasing company. This affidavit
confirms that the vehicle is primarily used for personal purposes. Once
submitted, the leasing company is responsible for filing a Lessor’s
Application for Personal Use Lease Automobile Exemption with the county
appraisal district where the vehicle is located. This application must be filed
before April 30 each year. Failure to file on time will result in the
vehicle being taxed for that year. Even though leased vehicles may qualify for
exemption, property taxes on other assets can still be significant. That’s why
many Texas property owners choose professional assistance to ensure they are
not overpaying.
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