With rising tax rates seemingly always in discussion, commercial property owners must explore proactive strategies to reduce taxable income, increase cash flow, and reinvest in their properties. Fortunately, multiple IRS-approved tax strategies can significantly lower your tax burden.
1. Cost Segregation: Accelerating Depreciation for Immediate Savings
Cost segregation is one of the most effective ways for commercial property owners to maximize tax savings. Instead of depreciating a building over the traditional 39-year schedule, cost segregation identifies components that qualify for shorter depreciation periods of 5, 7, or 15 years. This allows you to front-load deductions and significantly reduce taxable income.
With bonus depreciation reinstated to 100% via the “Big Beautiful Bill,” property owners can deduct the full cost of qualifying assets in the first year, leading to $30,000 to $100,000 in tax savings per $1 million in building costs.
2. Section 179D Deductions
The 179D Energy-Efficient Commercial Buildings Deduction provides tax incentives for property owners, designers, and contractors who invest in energy-saving improvements. If your building has undergone recent upgrades, such as improved lighting systems, enhanced insulation, or high-efficiency HVAC installations, you may qualify for a deduction of up to $5.81 per square foot.
This deduction is particularly beneficial for commercial property owners, architects, engineers, and construction firms working on government buildings. With proper certification and documentation, businesses can capture valuable tax savings while reducing their energy footprint.
That being said, this incentive is not a forever deal. As per the “Big Beautiful Bill,” Section 179D is set to be repealed for construction starting after June 30th, 2026. But by working with an expert at CSSI, we can help you claim this incentive before it’s gone.
3. R&D Tax Credits
The Research & Development (R&D) Tax Credit is designed to reward businesses that invest in innovation, whether through product development, software enhancements, or process improvements. This dollar-for-dollar tax credit can directly offset your federal and state tax liabilities, providing significant savings for companies engaged in qualified activities.
Many businesses assume they don’t qualify for the R&D tax credit, but industries such as manufacturing, construction, engineering, and technology frequently benefit. Even routine improvements in workflow automation or internal software modifications can make a company eligible. Identifying and documenting qualifying expenses is key to maximizing this benefit.
Recent developments under the passing of the “Big Beautiful Bill” enacts a temporary reversal of Section 174 Capitalization Rules. This allows for a full deductibility of R&D expenses, but only domestically.
4. Partial Asset Disposition (PAD): Capturing Hidden Deductions
If you’re planning renovations in 2025, Partial Asset Disposition (PAD) offers an opportunity to deduct the remaining basis of removed items, including disposal costs. This means that when you replace old HVAC systems, lighting, or flooring, you can write off the remaining undepreciated value instead of continuing to carry it on your books.
However, PAD is a “use it or lose it” opportunity. If you don’t claim the deduction in the year the renovation occurs, the benefit is lost forever. If renovations are on your horizon, now is the time to act.
5. Qualified Improvement Properties (QIP): Maximizing Interior Improvements
Qualified Improvement Property refers to improvements made to the interior of non-residential buildings, such as tenant buildouts or office renovations. Under the CARES Act, QIP was classified as a 15-year property, making it eligible for 100% bonus depreciation.
6. Capital to Expense “Reversal” Opportunity
New regulations allow building owners to retroactively expense previously capitalized costs, unlocking immediate tax savings. This can be a game-changer, as seen in a case where a property owner achieved $1.1 million in tax savings by applying this strategy to a single property. If you’ve capitalized expenses in the past, now may be the time to reevaluate and reclaim deductions.
Navigating Complex Tax Strategies with Experts
Understanding and applying these tax-saving strategies requires expertise. At CSSI, our team of engineering-based tax consultants specializes in maximizing deductions and reducing taxable income for commercial property owners.
By leveraging cost segregation, 179D, R&D, and other powerful tax incentives, you can protect your cash flow and reinvest in future growth.
Don’t leave money on the table, contact CSSI today for a no-cost analysis and discover how much you could save!
