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What Are The Potential Tax Benefits Of Investing In Commercial Real Estate?

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By Author: Rick Harris
Total Articles: 5
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Whether you want to buy a small apartment or a large commercial building, an investment in commercial real estate typically offers multiple tax breaks for your small company. Your financial advisor can determine how commercial real estate tax benefits work.

Read the guide to know more about how you can save on your taxes by investing in commercial real estate.

Interest expense
The interest money you pay on the mortgage for your purchase is subject to deduction. That means if the interest payments are made over the course of a year, the mortgage can be deducted from the tax you owe.

Depreciation expense
A building or other structures start to deprecate when someone buys it. The depreciation accumulates like a running meter and can offset a business’s tax liability.

Post-sales tax saving
Suppose you leave the commercial property to beneficiaries, and they decide to sell it over. In that case, they will need to pay tax only on the property’s increased value after your death.

Non-mortgage ...
... related expense

The maintenance, renovation, ongoing upgrades, and any other expenses associated with owning commercial real estate are potential deductions. These are considered out-of-pocket expenses. However, many of these expenditures enhance the value of the building. Condo fees pertaining to the purchase of a building can also be deducted, assuming you use the building for work purposes. Even if you live in the building, a portion of these condo fees would be eligible.

Capital gains
Some businesses invest in commercial property as a means to create an asset for retirement. A low capital gains tax rate is a potential benefit of commercial real estate as compared to other retirement investments like an IRA. When you have access to most IRA funds, you are likely to be billed at your personal tax rate on the funds. Selling commercial property also has tax implications; however, the capital gains tax rate pertaining to commercial real estate will be lower than the personal tax rate pertaining to the IRA.

Beyond taxes, an investment in commercial real estate serves as a de facto progression plan. Since most business owners do not seem to have solid progression plans, commercial real estate investment means that a company has a guaranteed asset after retirement. This holds true even if there is no one to take forward the business.

Small business owners do not have the knowledge and expertise in investing in real estate. This is why it is good to consult a professionally accredited financial or tax advisor to get through the process without any mistakes made.

More About the Author

Rick Harris is a reputed author and he writes various articles and he writes various articles on commercial real estate investments. He suggests choosing the commercial real estate for sale for getting higher profits.

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