When you own commercial real estate, you have to pay property tax. You can write off property tax for your business. This turns a fact-of-life into a strategic deduction that lowers your overall taxable income. Commercial landlords, self-employed workers and small business owners who own property solely for commercial intent can qualify for this deduction.
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Business property taxes apply to the assessed value of the company’s land or buildings. Property type and location play a pivotal role in determining how much tax you’ll pay, and each state and local jurisdiction can calculate the amount differently.
If you own commercial property, these annual charges substantially influence cash flow and economic planning. Strategically writing off property taxes for business can be a fiscal tool that can potentially reduce your company’s taxable income — lowering your tax burden to the IRS.
Not all business property owners are eligible for tax benefits. However, commercial landlords, small business proprietors, and self-employed workers who own property directly related to their business operations can qualify.
For instance, a landlord with rental units can claim mortgage interest, property taxes, operating expenses, depreciation, and repairs on their buildings and property, according to the IRS. A business owner or an entrepreneur with office space is also eligible for this deduction.
If you run your business from your home, a portion of home real estate taxes qualify if you use part of it exclusively and regularly for business.
Taking a deduction on tax for property ownership can influence the financial health of your business.
The IRS allows property tax deductions but sets specific criteria. Generally, you can only deduct taxes in the year you pay them, according to IRS Publication 535 on business expenses. Remember, tax regulations vary by state, so consulting local tax authorities can get you the most accurate information.
Allowable expenses generally include basic property taxes levied by federal, state, and local governments. The IRS also permits deductions for certain local benefit taxes if they’re specifically for maintenance, repairs, or interest related to public services. Carefully review your tax bill to identify these deductible elements and unlock potential savings.
Other opportunities for real estate income reductions might include expenses for managing and maintaining business property, foreign taxes, and specific environmental charges, provided they align with IRS rules.
Additionally, your commercial property tax is tax-deductible. You can deduct expenses related to business insurance from your taxable income, lowering your overall tax bill. Commercial property insurance covers your commercial spaces’ physical structure, equipment, inventory, and more. It protects against physical risks like fire, flooding and wind. It also covers acts of vandalism and other risks.
The IRS also states that charges for local benefits that could increase the value of your business property, such as streets and sewer assessments, are non-deductible. Nor are foreign real estate taxes — unless they’re tied to business or income-generation.
Note that the IRS limits how much you can deduct for state and local property levies. While service charges like water bills aren’t deductible as property taxes, they may qualify as business expense write-offs.
Learn more about non-deductible expenses for small businesses.
Claiming your property tax deductions requires attention to detail and familiarity with small business tax regulations. To help you navigate this task:
If you’re unsure about any part of the process, consult a tax professional. Accountants or tax advisors are well-versed in current regulations and can offer valuable insights — especially for complex situations.
Risk management is just as important as tax knowledge for landlords and entrepreneurs. NEXT offers small business insurance tailored to your unique needs.
If you oversee commercial property, run a retail store, or manage a restaurant, insurance coverage can be essential. Get a quote, secure coverage and get a certificate of insurance in under 10 minutes. Access your policy via web or app 24/7.
Amy Beardsley, insurance expert and contributing writer at NEXT Insurance, is a content marketing writer who specializes in small business coverage. Leveraging her background in the legal field, Amy brings a deep understanding of laws, regulations, and compliance requirements to her work. As a content marketing writer since 2016, she has contributed to publications like Legal & General, Berkshire Hathaway Specialty Insurance, Insurify, and NerdWallet. Her work has also appeared in CNBC, Kiplinger, and US News. When she’s not writing, Amy enjoys playing cards with her family and experimenting with new recipes.
