As a commercial property owner, it is crucial to understand the taxes associated with your ownership of commercial property to both maintain your property and improve your return on investment. While this page has some great general information, you may need more precise information about your local area. If you live in Grand Rapids, Michigan, for example, you can talk to the experts found at: https://grootrealtyco.com/grand-rapids-mi-property-taxes/.
Here is an overview of what you need to know.
Local Property Taxes – This tax is required by the local government. Commercial property is taxed just like your personal property, though at a different rate.
Federal Income Tax – Federal income taxes are paid by the holding entity on the net profit of the commercial property investment, which is your revenue after all expenses. This is essentially the profit you are making from leasing the property and it can be a tricky tax to navigate. If you find yourself caught out, you might need the assistance of a tax resolution service like federal-tax-resolution.com or some site similar.
State Income Tax – Just like federal income tax, state income tax is only paid on your net profit from the commercial property.
Local Income Tax – Depending on the location of your commercial property, you will have to pay a local tax. This varies by locality and you should consult your local government.
What the Local Government Expects from Commercial Property Tax – Every year the local government requires commercial property owners to complete and return an income and expense form. This form assesses your commercial property tax based on earnings and expenses you incurred for the year. Here are two things you must disclose:
Rental Income
Commercial property owners need to break down total rental income into the following categories:
- apartment and rooming houses
- commercial and industrial
- hotel, motel, inns, and bed and breakfasts
Provide details about the purchase of your property and if any major improvements or changes have been made since then. This ensures the government has an accurate assessment of your property and can tax you on the correct amount.
Expenses
Owners must provide every expense incurred that relates to the property. Everything from employee expenses to insurance. Being detailed is essential to making sure that you are not being over-taxed. If you are using one of the 7 best PEO in Texas then some of the expenses your business occurs like payroll and legal feels should be well documented with them. However many others will need to be well documented by your business and your accountant in order to make tax returns go as smooth as possible.
Examples of business expenses you should track include the following:
- management fees
- payroll and payroll taxes
- commissions for real estate brokers
- insurance cost
- advertising fees
- all utilities
- cleaning supplies
- general and seasonal decorations
- furniture
- legal fees
Should you at any point be confused about completing your tax return, then don’t worry. There are specialist tax preparation services out there, like H&R Block, whose job it is to make filing your taxes a stress-free experience. What’s more, you may even be able to save money on this process with a site like Raise.
