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When filing tax returns, most ordinary deductions are easy to figure out as even your account will be able to tell you about them. In your tax returns, you will be claiming deductions for the lease cost or mortgage interest, insurance and taxes if you own the building. It is important to make note of the depreciation of the commercial real estate. This depreciation is primarily a paper deduction and it can lower your bottom line without costing you anything in reality.
After this, you come to Schedule C deductions. If you are paying someone money to manage your property, you can claim deductions for management fees. However, if you are managing the property yourself, you still can claim deductions in terms of payment for utilities, cleaning, maintaining and repairing. Any assets and/or equipment you need for the commercial property is tax deductible either as a straight or accelerated depreciation item.
You can also claim deductions on a home office or leased office space. You can add telephone fee, office equipment and supplies as part of your deductibles. In addition, if you have to travel to inspect the property or attend an investment meeting, you can deduct the cost from your gross income. You can even deduct meal expenses while on travel and fees for ongoing educational seminars, magazines and books.
Many commercial real estate investors forget to deduct storage space for building material, appliances, plumbing supplies etc. The rent of the space can be deducted or depreciated.
Apart from deductibles, you should also look for tax credit items. Tax credit saves you money on taxes by directing reducing the taxes rather than the net profit. You can get tax credits for using energy efficient appliances and equipment in your building. You will get a tax credit of $1.80 per square foot with allowances for partial deductions for improvement on interior lighting, HVAC and hot water systems and building envelope systems. This primarily for commercial properties placed into services from January 1, 2006.
In addition, look for tax credits in you state if you have managed to create new jobs or your building is located in a targeted area.
In order to get more details on commercial real estate tax deduction and tax credits, you should approach your tax specialist for more information.
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