Owning commercial real estate may seem like the best option for businesses looking to build equity and control their space. However, the financial commitment, responsibility for property maintenance, and complex tax implications can be overwhelming.
Many businesses are finding that leasing a commercial space offers a more flexible and tax-efficient solution. At International Management Company (IMC), we help Jacksonville businesses navigate these decisions and unlock the significant tax benefits of leasing a commercial space. Learn how leasing can reduce your tax burden to determine if it’s the right choice for your business.
Owning vs. Leasing: A Tax Perspective
When it comes to commercial real estate, owning property offers traditional benefits like having full control of your space and building equity. However, leasing presents a different set of tax advantages. For many companies, the tax perks of leasing – combined with reduced maintenance responsibilities and upfront costs – make it a compelling option.
Key Tax Benefits of Leasing a Commercial Space
Here are some of the key tax advantages that make leasing a smart financial choice:
Deductible Lease Payments
One of the most significant tax advantages of leasing commercial property is that lease payments are considered a business expense. This means you can deduct your lease payments from your taxable income, reducing your overall tax liability. For businesses looking to maximize tax savings, this can lead to substantial savings each year.
No Depreciation Concerns
When you own commercial property, you are responsible for tracking and claiming depreciation on the property over time. Leasing, however, eliminates these concerns. Since you don’t own the property, depreciation is not a factor, allowing you to avoid the complexities of tracking and managing this aspect of your taxes.
Reduced Property Taxes
In Florida, property taxes on leased commercial spaces are often lower than those for owned properties. Additionally, the state’s tax on commercial rentals has decreased steadily over the years. Florida’s state tax on the rental of commercial property recently dropped from 4.5% to 2% as of June 2024, making leasing an even more attractive financial option for businesses in Jacksonville.
Mortgage Interest Deductions
If you lease commercial space but still have an ownership stake in some part of the property, you can deduct any interest paid on a commercial mortgage from your federal income taxes. This provides additional savings for businesses that have complex real estate portfolios or mixed leasing and ownership arrangements.
Flexibility & Lower Risk
Another indirect tax advantage of leasing is that it generally offers more flexibility compared to owning. Businesses don’t have to worry about fluctuations in the real estate market affecting property value, and they can easily relocate or expand without the financial burden of selling a property. This reduced risk can lead to more stable long-term financial planning.
Is Leasing Right for Your Jacksonville Business?
Deciding whether to lease or own commercial space depends on several factors, including your company’s financial situation, long-term goals, and the type of space you need. Leasing can be especially beneficial for businesses that want flexibility, tax advantages, and lower upfront costs.
At IMC, we offer a diverse portfolio of commercial properties throughout Jacksonville, with spaces that can accommodate a variety of business needs. From development and construction to full-scale property management, our team is dedicated to helping you find the perfect leasing solution for your business.
Lease Commercial Space With IMC Today
If you’re considering leasing commercial space in Jacksonville, IMC is here to help. Our expertise in commercial real estate and commitment to personalized service make us the ideal partner for your business.
Contact our team today to discuss your commercial leasing needs and find the perfect space to help your business thrive.
International Management Company, LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
