Commercial Real Estate Tax Strategies
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Taking Advantage of Tax Benefits: A Guide for Real Estate Investors
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Effective tax planning is necessary to reduce tax liabilities. In commercial real estate transactions, tax planning allows owners of commercial properties, real estate investors, and rental property owners to maximize their returns while keeping their tax liabilities minimal.
The field of taxation could get truly complex and daunting. For those involved in commercial property transactions, hiring real estate attorneys for personalized guidance on minimizing tax liability while ensuring compliance is practical.
Understanding Commercial Real Estate Taxes
Owning commercial real estate (CRE) in Georgia provides various benefits to investors. Rental income, price appreciation, and portfolio diversification are a few reasons why investing in real estate is lucrative. Georgia has become an attractive place to invest in real estate due to various incentives to investors, low taxes being one of them.
Common Tax Terms Explained
When you invest in CRE, the primary taxes that you are likely expected to pay are the following:
- Property tax
- Federal income tax
- State income tax
- Sales or rental tax
Each affects the investor’s assets and requires careful and effective tax planning to maximize the financial benefits.
- Property tax: This is calculated based on the property’s assessed value and the applicable tax rate set by the local government.
- Federal income tax: This tax is levied on the profit generated from your real property. This means that any income you derive from your property is subjected to income tax.
- State income taxes: This tax is collected by the state of Georgia on your rental real estate income. The rate depends on your tax income bracket.
- Rental or sales tax: The tax on the monthly rent collected from the CRE or rental property is called rental tax, sometimes sales tax.
Other taxes that may affect one’s commercial dealings include the capital gains tax. Capital gains taxes are imposed on the sale of a property. This tax is calculated at the same rate as income tax in Georgia.
Key Tax Strategies for Commercial Real Estate
As business cash flow grows, so do its tax liabilities. Therefore, it is crucial that a business owner understands how taxation works and adopts tax strategies to avoid being surprised by hefty bills.
Real estate attorneys with a comprehensive background in business and tax laws could assist you in legally reducing your taxes. Here are some key strategies that you and your lawyer can work on:
Maximizing Deductions and Credits
Perigon Legal Services: Your Partner in Commercial Real Estate Tax Planning
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