Are There Different Kinds of Commercial Property Tax?

When you’re starting out in commercial real estate, you might be surprised to learn just how much property tax liability you really have.

Read on to learn what the different kinds of property tax in Georgia are, and how your commercial property value is assessed.

The different types of commercial property tax

There are four different kinds of commercial property tax in Georgia, and depending on your business type, where you live and how much income you make, you may end up paying more than you bargained for when you bought your property:

  • Property: The government assesses a property tax based on the assessed value of the commercial property (which is not the same as market value). Commercial property tax is levied with a tax lien against the property until it is paid.
  • Federal: You must pay income tax on the net income (or profit) of the property—not the gross income. This does not include tenant security deposits.
  • State: Your state government may also tax the net income of your commercial real estate.
  • Local: Finally, some local governments will also tax the net income. It’s important to know whether your municipality will tax you, and see if you can pass those costs along to your tenants.

How a property market value is determined and taxes are assessed

Typically, the assessed values of a commercial property are far lower than the market value of the property. The assessors will look at a property every one to five years and try to determine its value. This helps the local government collect enough revenue to fund public programs and services like roads and schools.

The assessed value of a commercial property depends on its market value. Tax assessors will look at several different factors to land on a final value:

  • Fair market value: Here, the assessor looks at the sale of similar properties on the market in the area, with adjustments for the condition of the current market as well as any differences between the two properties.
  • Replacement cost: This method determines how much it would cost a business owner to replace the commercial property if they had to buy it on the free market, including improvements.
  • Income: Finally, your assessor might look at the income that they expect the property will generate, minus vacancies, operator expenses and more. You may be required to submit an annual income and expense report to help with this determination.

After your property value is determined, the tax assessor will determine the appropriate assessment rate for your property, your location and other local factors. You’ll generally see two types of notices: the assessment of the property value and then, 30 to 60 days later, the property tax bill.

Don’t overpay on your types of commercial property tax in Georgia. Property Tax Eagle of Georgia, LLC is here to help you reduce your liability so that you can keep as much of your income as possible. Reach out to us today to schedule an appointment with our team.

Read More