Taxes are an undeniable fact in the business world. If you aren’t careful, you can end up paying considerably more than your share. Being aware of the many IRS deductions that may be available to owners of commercial or investment properties is an excellent way to preserve your bottom line.

Interest Expense Deduction

Frequently, an investment Property owner will have a mortgage on the land and structures. This means that they are paying interest every year. Think of interest as being like a fee that the lender charges for using their money. No one likes to have to pay interest, but there is an upside.

The upside is that the interest expense on your commercial property is likely to be deductible. To maximize this deduction, it is important to understand the intricacies of the IRS tax code. You may need a CPA to provide you with guidance.

Depreciation

Even newer commercial and investment properties are subject to ordinary wear and tear. The good news is that when ordinary use causes any buildings to deteriorate, this can turn into an annual deduction on your taxes. Known as depreciation, this principle applies only to structures, not to the land on which they stand. This is because land typically does not depreciate. Buildings do, and that means the property owner takes a bit of a financial loss every fiscal year. Essentially, depreciation lowers net income for the year, which translates to lower taxes.

Of course, it’s important to use the right method of depreciation, and if your depreciation figures are inaccurate, it may have you paying more in taxes than you rightfully owe. It may be helpful to have a tax adviser calculate depreciation for you.

Deducting the Cost of Improvements

One of the most attractive features of owning investment property, at least from a tax standpoint, is the opportunity to deduct the expenses incurred from improving the property. Imagine that you make substantial improvements to a commercial property. This makes the property better suited to meet the needs of your tenants or your business. The improvements are expensive up front, but they will pay off in the long run. Improvements to a commercial building may be deducted for 39 years on federal tax returns. What’s more, you can deduct the expenses for land improvements for 15 years.

Deducting Losses

When you sell a commercial or investment property, you start out hoping to make a profit. However, this does not always happen. If you must sell a property at a loss, then this could prove to be beneficial to your taxes, as you can deduct your loss. This only applies if your purpose in owning the property was to generate a capital gain or rental income. Since this is true in many cases, the loss on a property sale can translate to good news on your taxes.

Deducting Property Taxes

Property taxes are an unavoidable part of doing business. Fortunately, some of this expense can be deducted from business taxes too. The property tax expense can be used to lessen overall profitability for the year. While paying more in Property Taxes may reduce how much you pay to the IRS, it is not desirable to pay an unreasonable amount.

Municipalities make mistakes when they are assessing properties for tax purposes. It may be that your property has been overvalued. As a result, you’ll pay too much in property taxes. If you suspect that your property is being over-assessed, then contact Assessment Technologies to learn more about an appeal. These property tax experts can help you to determine whether or not you’re paying too much, and they can even handle the appeal for you.