FAS | Blogs, Ideas, Tips, Tricks, Videos for Small Business | Bookkeeping and Tax Services Firm in Katy and Houston, TX

How to Maximize Deductions for Business Real Estate

2017-10-26 07:12:56.0

| Author: FAS

FAS specializes in small business bookkeeping and tax services. We work closely with small businesses in Katy, Fulshear, Houston and nearby areas. Call us for Free Consultation: 832-437-0385 .






Currently, a valuable income tax deduction related to real estate is for depreciation, but the depreciation period for such property is long and land itself isn’t depreciable. Whether real estate is occupied by your business or rented out, here’s how you can maximize your deductions.

Segregate personal property from buildings

Generally, buildings and improvements to them must be depreciated over 39 years (27.5 years for residential rental real estate and certain other types of buildings or improvements). But personal property, such as furniture and equipment, generally can be depreciated over much shorter periods. Plus, for the tax year such assets are acquired and put into service, they may qualify for 50% bonus depreciation or Section 179 expensing (up to $510,000 for 2017, subject to a phaseout if total asset acquisitions for the tax year exceed $2.03 million).

If you can identify and document the items that are personal property, the depreciation deductions for those items generally can be taken more quickly. In some cases, items you’d expect to be considered parts of the building actually can qualify as personal property. For example, depending on the circumstances, lighting, wall and floor coverings, and even plumbing and electrical systems, may qualify.

Carve out improvements from land

As noted above, the cost of land isn’t depreciable. But the cost of improvements to land is depreciable. Separating out land improvement costs from the land itself by identifying and documenting those improvements can provide depreciation deductions. Common examples include landscaping, roads, and, in some cases, grading and clearing.

Convert land into a deductible asset

Because land isn’t depreciable, you may want to consider real estate investment alternatives that don’t involve traditional ownership. Such options can allow you to enjoy tax deductions for land costs that provide a similar tax benefit to depreciation deductions. For example, you can lease land long-term. Rent you pay under such a “ground lease” is deductible.

Another option is to purchase an “estate-for-years,” under which you own the land for a set period and an unrelated party owns the interest in the land that begins when your estate-for-years ends. You can deduct the cost of the estate-for-years over its duration.

More limits and considerations

There are additional limits and considerations involved in these strategies. Also, keep in mind that tax reform legislation could affect these techniques. For example, immediate deductions could become more widely available for many costs that currently must be depreciated. 

© 2017


We help you plan, forecast and analyze your financial data
so you can get on top of your finances today to grow your
small business big tomorrow.

Should you buy a business vehicle before year end?

READ MORE

5 Ways to Dance Through Digital Disruption

READ MORE

Find the Right Path Forward With KPIs

READ MORE

Ensuring a Peaceful Succession With a Buy-Sell Agreement

READ MORE

Intelligent Insights: A CFO's Strategic Methods for Cost Controls

READ MORE

4 Surefire Ways to Sustain Business Growth

READ MORE

5 Factors that are Bad for your Business Financial Health

READ MORE

Top 8 Financial Tools for Small Business Owners

READ MORE

Small Business Owners' Top Tax Mistakes and How to Avoid Them

READ MORE

Top 5 Bookkeeping Systems for Small Business 2017

READ MORE

What Are Your Financial Statements Telling You About Your Business?

READ MORE

Small Business StartUp New Research Credit Claims, Explained

READ MORE

Financial Tools: Useful List for Growing Businesses

READ MORE

Capital Budgeting Techniques Maximizing Future Profits

READ MORE

Key Profit Drivers You Should Not Ignore

READ MORE

Small Business Tech Trends: Power of Cloud and Mobile Bookkeeping

READ MORE

Growth Game Plan: 30+ Ways to Improve Profitability

READ MORE

Medical Practice Growth Strategies: Improving Profit Margin for Doctor's Clinic

READ MORE

Is Your Business Growing? Profit and Loss Explained for Small Businesses

READ MORE

How Profitable are your Customers?

READ MORE

Dont Let Founders Syndrome Impede Your Succession Plan

READ MORE

Bridging the divide with a mezzanine loan

READ MORE

Critical connection: How costs impact pricing

READ MORE

4 Ways To Get (and Keep) Your Business Data in Order

READ MORE

Valuation often affects succession plans in hard-to-see ways

READ MORE

Fortifying Your Business With Enterprise Risk Management

READ MORE

4 Tips on Making your Marketing Emails a Blast

READ MORE

Fun fact: Phone service was taxed early and has been taxed often ever since.

READ MORE

Could an FSA Offer the Benefits Flexibility You Need?

READ MORE

Get Smart: How AI Can Help Your Business

READ MORE

7 Steps to Choosing a Successor for your Family Business

READ MORE

Year-End Bookkeeping Reminders You Dont Want to Miss for your Non-Profit Organization

READ MORE

Can't Keep Up with the Deadlines? 6 Tips for Attorneys to Achieve a Stress-Free Year-End Tax Preparation

READ MORE

6 Key Points that Construction Companies Must Have to Prepare for the Year-End Financial Closing and Tax Filing

READ MORE

Find Time for Strategic Planning

READ MORE

Making the Right Choice About Your Office Space

READ MORE

8 Things You Should Consider for Compliance When You Hire Independent Contractors

READ MORE

4 Ways to Encourage Innovation in Customer Service

READ MORE

Light A Beacon to Your Business with A Mission Statement

READ MORE

Turning Employee Ideas Into Profitable Results

READ MORE

Use Bench Marking to Swim With the Big Fish

READ MORE

5 Questions to Ask Yourself About Social Media

READ MORE

3 Ways to Supercharge Your Supervisors

READ MORE

Blockchain May Soon Drive Business Worldwide

READ MORE

Taking It to The Streets: 7 Marketing Strategies to Consider

READ MORE

Say, Just How Competitive Is Your Business Anyway?

READ MORE

Ask the Right Questions About Your IT Strategy

READ MORE

Bookings Vs. Shippings: A Sales Flash Report Primer

READ MORE

Could a long-term deal ease your succession planning woes?

READ MORE

Fun fact: Sit back and enjoy your frequent flyer miles

READ MORE

CONTACT US

Address | 810 S. Mason Road, Ste 160, Katy, TX 77450
Office | 832-437-0385
Email | admin@fas-accountingsolutions.com

Follow us:         

  
Type the characters you see in this image.