Commercial Property Tax Explained

How is commercial property tax valued in Georgia? You might be surprised to find out that they’re not just property taxes like the ones you pay on your home. Commercial real estate tax burdens include property taxes as well as state and local fees, among others.

When you’re starting out in real estate, it’s important to understand your commercial property tax burden before you purchase a property—the taxes could make the difference between a profitable business and a failure. Here’s a closer look at the different types of taxes you can expect to pay:

  • Federal income tax: Any income made from your commercial real estate is taxable, although there are plenty of deductions to be had for your expenses and business costs. You only pay this tax on the profits generated, not the gross income, which reduces your potential tax burden significantly—for example, security deposits are not considered income, because they are either returned to the tenant or used for repairs.
  • State income tax: States also tax businesses, which is calculated similarly to federal income tax. You’ll pay taxes on your profits only, not your gross income.
  • Property tax: Most people expect to pay property taxes when they invest in commercial real estate—it’s the federal, state and local taxes that catch them by surprise. Commercial property tax is levied similarly to the property tax you pay on a residence. When you’re determining how much to rent a property for, figure the cost of property tax into the rent so you’re not paying taxes out of your own pocket or profits.
  • Local taxes: Finally, your city or county may have additional local taxes that you’ll need to pay. Consider your personal income taxes as well as your business income—different locations tax commercial property as one or both, so you’ll want to be aware of what to expect and how to keep your tax burden as low as possible. Then you’ll have a clear picture of what you’ll need to charge in rent to get your real estate venture off the ground.

In Georgia, property taxes are assessed at the county level, by the county’s Board of Tax Assessors. The property is “required to be assessed at 40% of the fair market value unless otherwise specified by law (O.C.G.A. 48-5-7).” Taxes include the fair market value as well as the assessed value, in order to form a clearer picture of what the property’s worth would be if it were sold on the market today. If a property owner disagrees with their assessment, they can file a tax appeal to request a change.

If your property taxes have you experiencing sticker shock, particularly in the COVID-19 era, there’s no better time to talk to the team at Property Tax Eagle of Georgia, LLC. We pride ourselves on innovative solutions to lower your tax liability and help your business remain successful. Call us today to get started and get answers to any of your pressing property tax questions in Georgia!

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