Commercial property tax depreciation is the amount of money you can deduct from your business income based on the age of your commercial building. The older a building is, the more it depreciates.
If you own a commercial property, you may be able to deduct its depreciation from your business income. This is called “commercial property tax depreciation.” You can’t deduct personal property tax depreciation for residential real estate or for a personal residence.
Commercial Property Tax Depreciation: What Is It?
Commercial property tax depreciation refers to how much of your building’s cost you can deduct from your business income each year. You figure out your deduction by multiplying the percentage rate by the amount that you paid for the building. You can use either straight-line or accelerated depreciation methods for commercial property tax depreciation. Both methods are simpler than figuring out how much each part of your building has depreciated over time — which is why they’re popular with small businesses owners who don’t have time to track all this information themselves.
How to claim commercial property tax depreciation
Commercial property owners can claim tax depreciation on their buildings, fixtures and fittings.
Depending on the type of property you own, there are different ways to claim your depreciation. Here’s a guide to the different types of commercial property depreciation:
For most properties, you can claim capital works deductions for the decline in value of your building. For example, if you bought a business premises for $1 million and spent $200,000 on renovations and improvements, then for each year after that you can claim $10,000 (20% of $200,000) as an annual deduction against your income.
Commercial fixtures and fittings
If you’ve installed new fixtures or fittings in your commercial building (such as air conditioning or carpeting), then these can also be depreciated over their useful life as long as they’re listed in the ATO’s list of depreciable assets.
You can also claim capital works deductions for capital expenditure on building renovation or improvement works. For example, if you have added a new room to your premises or installed an air-conditioner, you will be able to claim a deduction for this expenditure.
If you own real estate that is used wholly or partly in carrying on a business, then you may be able to claim depreciating assets as tax deductions over their effective life. The effective life of an asset is the period over which it can reasonably be expected to be used by you.
If you lack insight into commercial property tax depreciation, then try seeking professional help. The benefit is that you will be in a position to get the best guidance. It will be best to have a one to con consultation with a tax depreciation advisor because he will be in the best position to guide you in this situation. Do not let the situation go worse and seek help right away.
The reason is that you invest significant time to develop your commercial property. Your efforts should not go waste by any means.