Commercial property tax is significantly different than the property tax you might be accustomed to paying if you own a home or other personal real estate. You have some options when it comes to paying your commercial property taxes, including trying to get it reduced. As a business owner, here’s what you need to know about commercial property tax in Georgia.
Types of commercial property tax
There are four types of commercial property tax: property, federal, state and local and rental or sales tax. Property taxes are based on the assessed value of the property, which usually is significantly higher than home real estate. Some lenders will ask you to put money in an escrow account to cover the commercial property tax.
If your real estate generates income, you’ll need to pay federal income tax on the net income (not the gross income). State and local taxes sometimes also tax the net income of your commercial property.
Finally, you may pay rental or sales tax based on your gross income to the state and city. That usually boils down to a percentage of your monthly rents and income. Should your tenants’ businesses also collect sales tax, they will be responsible for paying the state or city directly.
How commercial property tax is calculated
Property tax on your commercial real estate can be complex and confusing, but it boils down to how much your property is worth. The higher your property is valued at, the more you can expect to pay in taxes. However, that doesn’t mean the market value of the property, which is different.
Commercial property tax is calculated by the local tax assessor. They determine the value of similar properties in the area, recent sales, improvements made and occasionally how much income they think the property should be bringing in. This is opposed to market value, which is basically how much someone will pay for a property on the open market.
After the value is assessed, the tax assessor assigns a percentage of the property value to pay in taxes—which means that if your property is over- or undervalued, your tax liability could be very different. It’s crucial to get a current assessment so you don’t overpay.
Tax advantages of commercial property
Although commercial property tax in Georgia can be a lot more expensive than private property tax, there are some deductions and programs that make it worthwhile. For example, there are depreciation and pass-through deductions, which allow business owners to take losses or deduct up to 20 percent of their income, and Section 1031 of the federal tax code allows investors to defer capital gains when they sell a property, as long as they put the gains into purchasing a new property.
Are you overpaying on your commercial property taxes in Georgia? Property Tax Eagle of Georgia, LLC can help. We will work with you and the local and federal governments to ensure you’re not paying a dime more than you have to—call us today to get started.