Commercial Property and Real Estate Depreciation Defined

Examples of Commercial Buildings

Commercial buildings include offices, shopping centers, supermarkets, retail, restaurants, hotels, motels, casinos, entertainment, auto dealerships, self-storage, hospitality, hospitals, MOBs, etc. They can also include industrial buildings, warehouses, and factories. Residential properties, such as apartments and rental homes, have a shorter building depreciation life compared to commercial buildings.

How to Use Commercial Real Estate Depreciation

Below is an example of how commercial real estate depreciation works:

The plumbing costs of installing a 3/4″ copper pipe connected to a restroom sink in a supermarket building must be depreciated over 39 years. This means that we will spread the cost out over a period of 39 years.

That same 3/4″ pipe installed to a bakery sink qualifies as a 5-year write-off. The restroom sink is related to the operation of a building, while the bakery sink is related to the taxpayer’s business.

All buildings, commercial or residential, will require repairs over time. If you own a commercial or residential rental property, you will need to do maintenance, repairs, and renovations over time. The Tangible Property Regulations (TPR) tax legislation allows building owners to dispose of assets as they are replaced.

Take Advantage of IRS-Allowed Tax Benefits to Owners of Commercial & Residential Rental Properties Utilizing a Cost Segregation Study.

The only way to segregate these components is to have a detailed engineering-based Cost Segregation study performed on your property. McGuire Sponsel helps hundreds of CPA firms and clients nationwide with our engineering-based approach to Cost Segregation, which includes our work paper documentation and detailed engineering-based report that has survived IRS Audits for nearly 25 years.

BONUS: The IRS allows current building owners to claim depreciation dating back to 1986 that they should have been deducting from the day the property was placed in service. They do not need to amend past tax returns to do so.

All extra depreciation found as a result of our detailed engineering-based approach is claimed in the year of the election.

Reach out to our team at McGuire Sponsel to discover how we can help you with accelerating depreciation for your commercial or residential properties.