Commercial Property Taxes: Explained

Commercial property taxes are a vital source of income for local governments, making up an estimated 10% of the total revenue. Commercial property owners are required to pay real estate taxes on their property based on state and local laws. These taxes are used to fund government services such as police departments, fire departments, schools, and public transportation systems. As a result, taxes on commercial property are essential to ensure that these government services are adequately funded.

How Much Should I Be Paying in Commercial Property Taxes?

There are a number of factors that can affect the amount of taxes that commercial property owners are required to pay. The value of the property, the type of use, and the amount of land used for business purposes all have a significant impact on the amount of taxes due. Additionally, the location of the property and any applicable zoning regulations also affect commercial property taxes.

When a commercial property owner is faced with high taxes or believes that the assessed value of their property is too high, they can challenge the assessment in court or through an informal appeal process. The appeals process allows property owners to dispute their property assessments, pointing out errors or discrepancies in the assessment and often requesting a reduction in the assessment. This process may result in a reduction of taxes owed if the challenged assessment is found to be inaccurate. In states like Michigan a tax cap keeps property taxes from being greatly increased once a property owner buys their property and it has been reassessed based on the sale. Other states such as Illinois do not have such a safeguard in place and reassessments can occur that can cause property taxes to go up and down inconsistently.

In some cases, commercial property owners may receive reductions in their tax bills through various tax-exempt programs or credits available at the state or local levels. These programs are intended to provide support to businesses in order to promote economic development and job growth. For example, some states offer companies that create or retain jobs a tax credit. In addition, many states have specific credits for businesses that make energy efficiency or renewable energy investments or purchase new assets.

Who Can Help Me Understand My Commercial Property Taxes?

Overall, commercial property taxes are an important source of revenue for local governments and businesses must take them into consideration when assessing their finances. Business owners should be aware of the tax laws applicable in their area, as well as the processes available to challenge assessments. Additionally, commercial property owners should be aware of any potential tax breaks or credits they may be eligible for in order to reduce their tax liability. If you have questions about estimating your property taxes on a potential purchase, Farbman Group is here to help!