How Data Centers Are Taxed: Property Taxes, Abatements and PILOTs

Property tax on a data center campus falls into three buckets, and each one behaves differently over the life of the project.

• Land: taxed as real property. Before development it may carry an agricultural or other preferential assessment; conversion can trigger rollback taxes, covered in our guide to agricultural tax status and rollback taxes.
• Buildings and fixtures: taxed as real property. Data halls, electrical rooms, cooling plants and generators may be classed as real estate or personal property depending on state law and how they are attached.
• Computer equipment: servers, storage and network gear are usually taxed as business personal property, where a state taxes it at all.

Virginia’s Joint Legislative Audit and Review Commission (JLARC) found that localities with data centers collect substantial revenue from the industry, primarily from business personal property and real property taxes.¹ In Prince William County, for tax year 2024, data centers’ real property produced more than $130 million and the computer and peripherals tax nearly $124 million, out of $280.2 million in total data center tax revenue.⁸

The equipment bucket is what makes data centers unusual. A warehouse of the same size holds little taxable personal property. A data hall can hold equipment worth several times the building, and because operators refresh servers every few years, the taxable equipment base keeps being replaced at near-new values. Not every state taxes it: some states exempt business personal property or data center equipment, so check the state rules before modeling revenue or cost.

Real property: the cost approach dominates

Assessors have three standard tools: the cost approach, sales comparison and the income approach. A Vorys analysis argues that the last two fit data centers poorly, because a data center tends to trade as an operating business, so sale prices and rents mix real estate value with the value of the enterprise.⁹ That leaves cost less depreciation as the usual method, and it is where many disputes land: which costs count, how fast components depreciate, and whether specialized systems carry functional or economic obsolescence.⁹

Virginia goes further and writes the method into its budget act: data center fixtures classified as real estate are to be valued by localities using the cost approach (cost less depreciation), not the income they generate, at 100% of fair market value.¹⁰

Equipment: percent-of-cost schedules

Business personal property is usually assessed by applying a depreciation schedule to original cost. Loudoun County calculates assessments as a percentage of original cost, including shipping, installation and sales tax, and starting with tax year 2026 requires filers to report capitalized costs by year of acquisition for the latest year and the prior five years.⁵ After a benchmarking study by PFM Group, the county raised the factors for newer data center equipment.⁵¹¹

The schedule matters as much as the rate. JLARC noted that a locality’s take depends on its rate and how quickly it depreciates equipment, and that some Virginia localities cut their equipment rates sharply to attract data centers, which also cut the revenue they can collect.¹

Loudoun County, Virginia shows what the equipment tax can do to a local budget. The county’s FY2026 budget materials state that data centers generate 38% of General Fund revenues.² Computer equipment in data centers is taxed at the county’s general business personal property rate, the same rate that applies to many other businesses,¹² which the county lists at $4.15 per $100 of assessed value for tax years 2026 and 2027.¹³

The county treats that revenue as volatile. Its Revenue Stabilization Fund targets 10% of budgeted data center real and personal property tax revenue; the FY2026 adopted budget added $39.7 million, bringing the fund to $119.7 million.² A short illustration of why: under the TY2026 schedule, $500 million of servers bought in 2025 would be assessed at $300 million (60%), producing about $12.5 million in tax at $4.15 per $100. The same servers drop to 45% of cost the next year, and to 10% by their fifth year, unless they are replaced.⁵¹³

JLARC’s review of five mature Virginia markets found data center revenue ranging from under 1% to 31% of total local revenue, depending on market size and local tax rates.¹ The lesson for other counties is that Loudoun-scale results come from a large, mature cluster, not from a single campus.

Where a state allows it, a county can reduce a data center’s property tax for a period of years. The mechanics vary by state, but most deals fall into three types.

In Texas, Medina County designated a 244-acre CyrusOne site as a reinvestment zone and scheduled action on an 80% abatement.⁴ A Haskell County notice for a proposed data center abatement covered real and business personal property, including computer servers, with improvements estimated at over $1 billion.¹⁴

In Georgia, the Stanton Springs project used taxable revenue bonds: the developer pays rent to the joint development authority and makes PILOT payments to the four member counties, the bonds are repaid from the user’s revenues, and the authority and counties are not liable for the debt.³ In Louisiana, West Feliciana Parish’s structure has the developer donate its property to the parish, making it tax exempt, then lease it back under a PILOT; the first payment is due July 1, 2027.¹⁵

Local bodies negotiate how PILOT money is split. That split matters to schools in particular, because PILOT payments may not flow through the usual levy formulas. Read the intergovernmental agreement, not just the headline amount.

Data center tax revenue has funded lower homeowner tax rates, reserves and capital projects in Virginia’s data center counties.²¹ It also has costs that are easy to miss.

• State school aid: Virginia’s Local Composite Index measures each locality’s ability to pay for schools, with the true value of real property weighted at 50%. A higher index means less state funding.⁷ A large data center real estate base raises local wealth on paper while adding few students.
• Volatility: equipment values fall quickly and depend on refresh cycles, which is why Loudoun sets aside a share of data center revenue in a stabilization fund.²
• Transparency: a 2026 Good Jobs First study found 14 states do not disclose revenue lost to data center tax breaks, though their programs meet the accounting definition of a tax abatement.¹⁶
• Service costs: roads, emergency services and utility extensions add local costs that belong in any net fiscal analysis.

For a county weighing a project, the useful question is net revenue over 10 to 20 years after any abatement, school-aid effects and service costs, not first-year revenue. Our guide for county officials covers the wider review.

1. 01Confirm how the state classifies servers, generators, cooling plant and electrical gear: real property, personal property or exempt.
2. 02Get the county’s current equipment rate and depreciation schedule, and check whether either has changed recently. Prince William raised its rate for FY2026, and Loudoun changed its schedule for tax year 2026.⁶⁵
3. 03Model taxes across at least two server refresh cycles, not just year one.
4. 04Ask whether the county or a development authority offers abatements or PILOT structures, what investment and job targets apply, and what happens if phases are delayed.³
5. 05If you own the land, understand how the sale or lease will change your own tax position, including rollback taxes and any ground lease provisions on who pays.
6. 06Budget for valuation questions. Assessors may lack data center experience, which can lead to inaccurate assessments that owners then appeal.⁹

Tax treatment rarely makes a site, but it can separate two good ones. Our incentives vs. power cost guide covers that trade-off, and you can get a site reviewed for power, land and entitlement fit before modeling taxes in detail. Confirm specific treatment with the county assessor and a tax adviser.