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What are the tax benefits of owning commercial real estate?

Curious about Commercial real estate

What are the tax benefits of owning commercial real estate?

Owning commercial real estate in the country can offer several tax benefits, but it's important to note that tax laws and regulations may change, so it's advisable to consult with a tax professional or accountant for the most uptodate and tailored advice. Here are some potential tax benefits of owning commercial real estate:

1. Depreciation Deductions: Commercial property owners can claim depreciation deductions on the property's structural components and certain improvements. Depreciation can significantly reduce taxable income, providing tax savings.

2. Interest Deductions: Interest paid on loans used to purchase or improve commercial real estate is generally taxdeductible. This deduction can help lower the overall tax liability.

3. Property Tax Deductions: Property taxes paid on commercial real estate are typically deductible as a business expense. Deducting property taxes can reduce taxable income.

4. Operating Expenses Deductions: Various operating expenses associated with managing and maintaining the property, such as insurance, maintenance, and property management fees, can be deducted from rental income.

5. 1031 Exchange: A 1031 exchange, also known as a likekind exchange, allows property owners to defer capital gains taxes when selling one commercial property and purchasing another of equal or greater value. This can provide a significant tax advantage for investors looking to reinvest in real estate.

6. PassThrough Tax Deductions: If you own commercial real estate through a passthrough entity such as a partnership or LLC, you may be eligible for passthrough tax deductions, which can reduce the tax burden on rental income.

7. Qualified Business Income Deduction (QBID): Under certain conditions, business owners who operate their business from a commercial property may be eligible for the QBID, which provides a deduction on qualified business income.

8. Energy Efficiency Tax Credits: Investing in energyefficient improvements for commercial properties, such as solar panels or energyefficient HVAC systems, can make property owners eligible for tax credits.

9. Opportunity Zones: Investing in commercial real estate located in designated Opportunity Zones can provide tax incentives, including capital gains tax deferral and potential forgiveness.

10. Home Office Deduction: If you use part of your commercial property as a home office for your business, you may be eligible for a home office deduction, which can reduce your taxable income.

It's crucial to keep thorough records of all propertyrelated expenses and consult with a tax professional to ensure you're taking full advantage of available tax benefits while remaining compliant with tax laws. Tax regulations can vary depending on the specific location and type of commercial property, so personalized guidance is essential.

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