(More) Last-Minute CRE Tax Break Considerations

 December 8, 2022

By  Guy Gray

Nothing sneaks up on people quite like the end of the year. Before you know it, Christmas lights start to appear, the temperatures drop and it’s time to start thinking about taxes again. The good news is that there is still a little time left this year to make any adjustments you need to make.

As we covered in 2021, there are several last-minute tax break considerations CRE pros should know, from bonus depreciation to deferred capital gains. We’re back again with several more last-minute tax breaks that can benefit commercial real estate professionals for 2022 taxes.

We’re not CPAs, so further research is needed on any one tax-break consideration here, but we’re hoping this list will at least help with awareness and help you save on 2022 taxes.

Accounting for All Losses

Commercial real estate has been tough lately—that’s no secret. Losses have been mounting for many individuals and companies. But you can use this to your advantage when it comes to tax season, if you’re a commercial real estate investor making less than $150,000 a year. You can also hire a full-time property manager or assistant to possibly qualify for loss deductions on investment income that way. While there are several factors involved that warrant investigation, this is definitely a tax break to consider as we approach the end of the year.

Looking Into Lesser-Known Deductions

Another significant tax break is the result of the Tax Cuts and Jobs Act of 2017, which allows qualified business income (GBI, aka pass-through deductions) to be claimed. This applies to sole proprietors, LLPs, LLCs and other organizations running profitably and allows you to claim as much as a 20 percent deduction on business income. Check to see if you qualify!

Choosing Where To Invest Retirement Funds

You may also get some tax savings depending on how you invest for retirement. While IRAs are the traditional account to choose, they are taxed at an individual rate when withdrawn. But many choose to invest in CRE for retirement, though it’s important to know that you’ll have to pay a capital gains tax penalty when you sell. Then again, the capital gains tax rate is usually much less than personal tax rates, so it’s worth looking into. 

Taking Advantage of Tax Credits

There are too many tax break programs out there to list them all, but make sure you’re taking advantage of all tax credit programs and applying for ones where you think you’ll qualify. Some of the most well-known tax credits include the HTC, NMTC and LIHTC programs.

Beneficiaries

While not a common tax break, if your commercial real estate property was inherited, you should know that taxes are based on its initial purchase price instead of today’s value, potentially saving the investor/property owner hundreds of thousands of dollars (or more).

With Quarem, you can automate and organize data related to taxes so it’s ready when you need it. Request a demo today!

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About the author 

Guy Gray

Guy Gray serves as Chief Operating Officer overseeing our technology and client services teams. He is responsible for guiding Quarem application development, networking and security, as well as new client implementations.

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