If you happen to be new to commercial real estate investing, there may be some subtleties about tax laws that you’re unaware of. The kind of tax breaks that you can realize through your investments will depend on which type of commercial real estate property you’re dealing with. Here are some tips on how you can maximize your tax advantages through specific types of investments.
Multi-family CRE
This type of commercial real estate investment involves two or more residential properties, with each housing a single-family or individual. When investing in multi-family dwellings, it will be possible for you to use a 1031 Exchange to trade up and acquire a larger dwelling which might be more lucrative for you. This is one of the best tax advantages you can use on a multi-family dwelling.
Office CRE
Office properties tend to be very popular with commercial real estate investors. They can be anywhere from a small single building to a multi-story type of building. One that would be leased by a major corporation. One of the biggest tax advantages is that the mortgage interest and the taxes will be fully deductible as business expenses. You can also depreciate the building’s value over 39 years, which will allow you to reduce your taxable net income.
Industrial CRE
In addition to deducting mortgage interest costs, you will be able to deduct property repairs, the cost of any maintenance, operating expenses, and property management expenses. Ultimately, to lower your tax liability. This can be a significant amount of money over even a single year. It can help offset the cost of acquiring the industrial property.
Residential CRE
The single biggest tax break from purchasing residential real estate is in deducting mortgage interest. Previously, it was possible to deduct the interest on a home that cost as much as $1 million. However, that amount has since increased.
Are You Considering Investing in CRE?
We may be able to provide financial assistance for your next commercial real estate venture. Contact us at Lighthouse Capital to find out how we can provide funding for your next major CRE transaction.