Tips for Lowering Commercial Property Taxes

A net effect of the pandemic has been large increases in property value, including commercial spaces. While an increase in commercial property value can be a big win for your business, it also carries the burden of higher commercial property taxes. If you have commercial property, you’ll owe taxes one way or the other. But you can take steps to lower your obligations, helping you keep more money for your business.

Take a frank look at your needs

One of the more aggressive approaches to lowering your property tax burdens is determining whether or not you truly need the property you have. Another lingering effect of the pandemic is more business being done online and more workers performing their jobs from the home. If you’ve already moved toward a largely online business model, you may not need the brick-and-mortar storefront and the property taxes it carries.

If you have the bandwidth and resources, you could also consider leasing your commercial property. Nolo contributor Matt Larson notes that investing in commercial property and leasing it to other businesses has major potential to generate profit. What’s more, Larson points out that you can also pass the property tax obligations and other expenses onto your tenants, leaving you to pay the mortgage costs alone. However, commercial real estate is a business unto itself and should only be considered if you can manage it alongside your current business. 

Explore property tax deductions

Commercial property taxes are set by your municipality and are used to help pay for community necessities like roads and schools. Randa Kriss, a senior staff writer at Fundera, notes that you could potentially offset property tax increases via the IRS’ Publication 535. This allows businesses to deduct real business property taxes as an expense if the amount is based on an assessed value. However, Kriss notes that the rule won’t apply to taxes used to benefit the local community.

Your business may also qualify for local exemptions and deductions specific to businesses and certain kinds of property. Kriss notes that these will largely vary based on your municipality and local tax laws, but the benefit of a lower property tax bill may be more than enough to offset the effort needed.

You can also appeal directly to your local tax authority to have your property reevaluated. Glenn Curtis, a contributor with Investopedia, suggests that a great way to prepare for this reevaluation and increase your chance of an adjusted tax bill is to research the value of neighboring properties. If you notice discrepancies in value between your business and others, your tax authority may have made an error.

When it comes to lowering your tax burden, your best bet is to acquire the services of a tax advisor. Kriss suggests that this potential expense pays dividends because someone more familiar with tax laws can more easily discover breaks that can save you money. What’s more, they’ll ensure that you comply with laws as they change, saving you further burden and headache down the line.