Commercial real estate is an excellent investment. There’s no arguing that fact. What are the tax implications for commercial real estate annually that might surprise new investors?

Similar to purchasing a residential property, there are taxes on commercial properties including property, state and local, federal and rental or sales tax. Knowing how each of these will apply to your investment can be helpful in advance of selling.

 

Property Taxes

Property taxes may be familiar if you’ve purchased a home before as these taxes are assessed annually on your residence. The difference for a commercial property is that they are based on the assessed market value of the property because they generally produce income and the value is often greater than a residence.

If you own the property without a mortgage or bank loan, you can make monthly, quarterly or annual payments. How you decide to pay your property taxes is a great conversation between you and your tax advisor in advance so that the bill does not surprise you at the end of the year.

Property taxes vary by state and this provides a great look at rates in each state. Here’s another look at median property taxes by state.

 

State and Local Taxes

State and local taxes vary by state. A tax professional can assist you in compliance with state and local offices in order to assess your tax situation correctly. This depends on the nature of your business as well and should be factored into the rent (if applicable) for the property.

 

Federal Taxes

As a business owner, federal taxes are no surprise. Taxes are owed to the federal government based on net income not gross. There are important details to note related to net income that a tax advisor can assist you with as you prepare for your taxes.

 

Rental and Sales Taxes

Some states and local governments tax properties based on gross income of a rental property. In a state like Florida, with rental properties as a great source of income, it’s important to be aware of taxes like this and structure rent accordingly. If your business collects sales tax, you already likely know that you are responsible to pay that sales tax to the state usually quarterly.

 

At Weaver Realty, we work with new and seasoned investors every step of the way in building a commercial real estate portfolio. We strive to educate business owners and provide assistance to be successful in operating a commercial property business. With decades of experience in commercial real estate, property management, facilities management and project management, we are uniquely prepared to make your business dreams a reality. Call us today to find out how we can help you at 904-733-0039.