Commercial property taxes aren’t just about due dates. So many businesses look at their commercial property taxes as a fixed cost. Every year you get a bill, pay it and move on, just as you treat a true fixed cost such as an employee’s salary or your building’s mortgage.
It doesn’t have to be this way!
Your commercial property taxes are a variable cost of business. Think of these taxes like you would your electric bill: The cost is not always the same.
You’re able to influence, challenge and negotiate your commercial property assessments. The laws are on your side to ensure that you’re only paying your fair share.
Remember, property taxes are your largest cost of occupying commercial real estate. Why wouldn’t you want to lower your cost of occupancy?
If you’re able to reduce the tax value of your property, you’ll reduce the taxes you’re liable to pay for occupying that space.
The process is a bit daunting and does take time, but the results are tangible because you’ll see real tax refunds. This is found money that you can’t budget for. When the savings arrive, you’ll be free to invest those funds back into your business to reduce operating expenses or pay for capital improvement projects.
Paying commercial property taxes should be reviewed like a business decision rather than just another item automatically approved to be added to an accounts payable list.
Use these five tips to lower your commercial property taxes for both real estate and personal property.
Figure out how much you pay in property taxes annually:If you’re responsible for a corporate property portfolio with dozens or hundreds of properties, you might not know exactly what your organization is paying every year in commercial property taxes. Whatever you’re paying a year in property taxes, you should be paying attention to this cost and looking for ways to lower it via property tax appeals.
Use this exercise as an exploration of opportunity cost. If you’re only paying $100,000 a year in property taxes, perhaps you’ll find savings through an informal negotiation rather than going through a lengthy appeals process; it could be a different story if you’re paying $1 million annually.
Identify tax bills that provide discounts for early payment:Some taxing jurisdictions offer incentives for making early payments. Counties in Florida, for example, offer a staggered discount (up to 4 percent) for paying early. Know the taxing jurisdictions you own property in and be aware of any incentives they provide that could save you money on commercial property taxes.
Avoid extra fees for staggering payments:Many taxing jurisdictions around the U.S. allow property taxes to be paid in installments. Paying in installments is fine if there’s not a compelling reason to do otherwise. But it’s likely that there’s a cost associated to staggering property tax payments. Make sure that you’re not paying extra by paying in installments. Furthermore, if your taxing jurisdiction offers an incentive for paying your property tax bill all at once, it’s worth taking advantage of that opportunity.
Leverage the appeals process in your favor:Each taxing jurisdiction has its own specific requirements and rules for commercial property tax appeals, and these sometimes can be used in your favor. In Georgia, for example, when you’re appealing the tax valuation of a property, you only have to pay 85 percent of your property tax bill while the property is under appeal. Of course, if you lose your appeal, you’ll end up paying the remaining 15 percent. But if you win, you’re not left waiting for a large refund. In this scenario, you’re also holding onto your cash longer, which is advantageous to your business. Many jurisdictions offer ways for commercial property owners to avoid paying their full property tax bill immediately during an appeal. Assess your portfolio for properties in these jurisdictions and start appealing.
Talk to your local assessor:Take the time to get to know your local property tax assessor and come to any meetings prepared. Educate yourself about your property. Know the square footage of your properties, what your properties are worth and how similar properties in the same jurisdictions are assessed. Understand the types of properties you’re talking about (i.e., manufacturing versus big-box retail versus industrial) and know the locations of your properties as well as their purchase prices and date of acquisition.
To have a productive conversation with your assessor, other good points to be knowledgeable about include:
- What prices similar buildings have sold for in the jurisdiction
- Average rental rates in the jurisdiction
- How much it costs to operate your building annually in both fixed and variable costs
- The appropriate capitalization rate for your specific property type, location and occupancy.
Alternatively, considering hiring a consultant or expert to evaluate your property status on your behalf. Expert property tax consultants have the time and expertise to get you the best tax returns on your valuable investments.
Download The 5 Reasons You Should Challenge Your Current Commercial Property Tax Assessments to unlock hidden savings opportunities for your company.