From paying the utility bills for large buildings to maintaining multiple systems in sound condition, commercial property owners face staggering expenses. However, when considering cost-cutting measures, they must ensure that the comfort and satisfaction of tenants, customers, and visitors are not compromised.
Fortunately, commercial property owners can tap into their buildings to unleash opportunities that will reduce expenses while enhancing the building’s appeal. Many of these methods are found in the federal tax code and, when properly implemented, will offset the sizable financial burdens with which building owners contend.
As a commercial building owner, have you considered these five money-saving strategies?
1. Install sustainable features. Collectively, commercial and residential buildings account for almost 40 percent of the energy consumed in the U.S. Aside from the detrimental impact that such consumption has on the environment, it represents significant expense for the building owners responsible for the utility bills. Sustainable features, such as LED lights and window films, will reduce energy usage and reward owners with cost savings for years to come. In addition to lower utility costs, green design yields multiple indirect benefits, including greater tenant and customer comfort, enhanced aesthetic appeal, and higher property values.
2. Claim the §179D deduction. In addition to the savings that naturally stem from adopting sustainable features and practices, the federal tax code rewards commercial building owners for going green. Under §179D, building owners may claim a tax deduction of up to $1.80 per square foot for energy-efficient upgrades to new or existing commercial properties. Specifically, this provision offers a maximum deduction of $0.60 per square foot for lighting, $0.60 for HVAC, and $0.60 for the building envelope. When constructing a new commercial building or undertaking a large-scale retrofit of sustainable features, building owners may reap substantial tax savings through the §179D deduction.
3. Perform a cost segregation study. Building owners can improve cash flow by simply reclassifying real property assets as personal property. Generally, real property is depreciated over 39 years, while tangible personal property is depreciated over five, seven, or fifteen years. The IRS-approved strategy of cost segregation allows taxpayers to capture accelerated deductions by reclassifying certain elements of the property, such as light fixtures or wall coverings, and depreciating them over the shorter lives of personal property assets. The benefits of cost segregation include greater and more immediate tax savings for the building owner.
4. Apply the tangible property regulations. Embodied in §263(a) of the tax code, the tangible property regulations affect all taxpayers that have acquired, produced, or improved tangible property, including buildings or equipment. By expensing items that were capitalized as improvements in prior years, taxpayers may use these regulations to claim additional deductions and losses. When applied properly, the tangible property regulations may yield hundreds of thousands of dollars in deductions.
5. Seek professional tax assistance. Many provisions of the federal tax code are highly complex and subject to frequent changes as tax law evolves. In addition, state laws may equip taxpayers with further opportunities to reduce their tax burdens. The best way to ensure that you are seizing all available incentives is to consult with an experienced tax professional.
With a unique combination of tax and engineering expertise, the Capital Review Group team harnesses maximum savings for our clients. Don’t leave dollars in the walls of your building — contact CRG today to begin optimizing your money-saving strategies!