Real estate can be an excellent investment to preserve wealth, provided that the right tax tools are applied. However, real estate can be a risky venture too, especially if you don’t do your taxes right. You can secure your investments and enhance your return on investment (ROI) by taking advantage of specialty tax services.
Here are three tax tools all commercial property owners must know:
Cost segregation studies are a type of federal income tax analysis that enhance the cash flow in short term through a deferral. It utilizes shorter recovery periods to speed up your returns on investment. Regardless of whether your real estate has been recently purchased, constructed, or renovated, the building’s components can be thoroughly reclassified by a cost segregation study.
This study puts specific portions of your building into 5, 7, and 15 year life-spans, which are usually included in 27.5 or 39 year categories.
Energy Tax Incentives
It is a known fact that 179D deduction ranges between $0.60 to $1.80 per square-foot, depending on whether the energy cost reduction equals or is less than 50 percent. To qualify for these deductions, building owners need to get energy tax certifications by working closely with a firm that offers analysis and certification services. Learn more about this process here.
The benefits are obvious: a marked reduction in operating expenses and enhanced efficiency leading to greater ROI.
Assets such as HVAC units, lighting, and other building parts are often abandoned following a demolition or renovation of a building. Hence, their book value can be treated as a deduction in a business. Tangible personal property in a structure may be written off whenever a building is remodeled or demolished.