How to Write Off Commercial Property: Save More on Your Next Sale

Thinking about selling a commercial property but worried about the tax hit? You're not alone. The trick most people miss: writing off as much as the law allows. But here's where it gets interesting—when you know what to write off, you can hang on to a lot more money.

First, let's clear something up. Writing off commercial property is not just about paperwork after a sale. It's about knowing which costs you can deduct, how depreciation works, and planning ahead before the sale even starts. If you get this right, you can seriously lower how much tax you pay and keep your business running smoother.

Keep reading if you want real tips about writing off commercial property the smart way, without the usual confusion. Whether you're a seasoned investor or just working on your first property sale, a few smart moves can make a world of difference to your bottom line.

• What Is a Write-Off for Commercial Property?
• Depreciation: The Real Power Move
• Deductible Expenses You Might Miss
• How Selling Affects Your Tax Write-Offs
• Avoiding Common Write-Off Mistakes
• Next Steps: Planning Your Sale and Tax Strategy

What Is a Write-Off for Commercial Property?

When most people talk about a write-off, they're really talking about lowering their taxable income by claiming business expenses. In the world of commercial property, this can mean deducting the cost of buying, operating, maintaining, or even selling a property—if it's used to generate income for your business.

The main goal here is to make sure you don’t pay tax on every dollar your business brings in. The IRS allows you to subtract certain expenses directly related to your commercial property from your yearly profits. This is why knowing exactly what a write-off covers is a game-changer when dealing with Uncle Sam.

Here’s what usually counts as write-offs for commercial property:

• Mortgage interest paid on loans for the property
• Property taxes assessed by local governments
• Repairs and routine maintenance—think fixing a leaky roof or painting a wall
• Insurance premiums for the building
• Utilities like water, power, and trash services

Let’s be clear—personal expenses or improvements that simply boost the property value (like a brand-new swimming pool at your warehouse) don’t usually count. The IRS wants proof that each cost directly ties back to running your business property.

Commercial property owners also get a big break called depreciation. Depreciation lets you slowly deduct the cost of your building over 39 years, since, in the IRS's eyes, buildings wear out over time. This is different from just deducting what you spent in a single year.

And here's a wild stat: According to IRS data, U.S. businesses chalked up over $1 trillion in deductions for depreciation and property expenses just last tax year. So, figuring out how to write off your commercial property isn’t just about saving a few bucks—it can make a major dent in your tax bill.

Depreciation: The Real Power Move

If you’re serious about saving money on taxes, understanding depreciation is non-negotiable. Here’s the deal: The IRS lets you write off part of your commercial property’s value every year as it “wears out,” even if its market value is actually going up. That’s huge.

For most commercial properties, the IRS sets the depreciation period at 39 years. That means you divide the building’s cost (not the land—just the structure itself) by 39, and claim that chunk every year as a deduction. So if your building (without land) was $780,000, you can write off $20,000 a year just for owning it.

Depreciation doesn’t just apply to the building. If you’ve made improvements—new roofs, HVAC systems, security systems—those usually count too, but some get shorter lives (think 15 years or less) depending on what they are. Talk about a bonus.

• You can’t depreciate land—only the structure and some improvements.
• To claim depreciation, you need to have used the property for business—no personal vacation homes here.
• If you sell early, you may have to pay back some of those tax savings (that’s “depreciation recapture”), but the yearly tax breaks often far outweigh that.

Check out how depreciation stacks up in a real scenario:

This is the part a lot of folks miss—depreciation gives you a legal way to lower your taxable income every year you hold a commercial property. And when it comes time to write off commercial property, this is where the real magic happens.

Deductible Expenses You Might Miss

Most folks just think about the big-ticket stuff like loan interest and property taxes. But when it comes to squeezing every dollar from your write off commercial property strategy, there’s a lot more on the table. Miss one, and you could end up paying more tax than you need to.

Let’s break down some of these less obvious deductible expenses so you can keep more money in your pocket. Here’s what you might be forgetting—or just didn’t know was fair game:

• Repairs vs. Improvements: Small repairs like fixing leaky pipes or patching up a roof? Totally deductible in the year you spend the cash. But upgrades that increase the property’s value (like a new storefront) have to be depreciated instead.
• Legal and Professional Fees: Fees paid to lawyers, accountants, or consultants directly related to the sale or management of the property can often be deducted right away.
• Advertising Costs: That money you spent on online listings or signs to attract tenants or a buyer? 100% deductible.
• Utilities and Maintenance: If you covered electricity, water, or landscaping for vacant or occupied space, don’t forget to claim those expenses for the period you owned the property.
• Insurance Premiums: Business insurance, liability insurance, or even fire and flood insurance premiums paid for the property can be deducted for the year paid.
• Travel Expenses: Did you drive or fly out to check on the property, show it, or meet with professionals? You can often deduct mileage and travel costs if it was strictly business related. Just keep those receipts and mileage logs handy.

Want some hard numbers on what property owners are writing off? Here’s how it often breaks down according to 2023 IRS data for Schedule E filers:

Keep in mind, it’s easy to forget small things if you just rely on memory. Set up a simple spreadsheet or use your favorite budgeting app to track every expense during your ownership. Add digital copies of receipts, and review a checklist with your CPA before tax time. Sometimes that last $500 expense you almost missed can really add up across multiple years—and multiple properties.

How Selling Affects Your Tax Write-Offs

Selling your commercial property changes the game when it comes to your tax write-offs. A lot of property owners are surprised to find that what they claimed as a deduction in the past, like depreciation or repairs, can come back into play at tax time—sometimes in ways you don't expect.

Here’s the real deal: Once you sell, the IRS wants to know how much of your property you’ve ‘written off’ over the years. The amount you’ve claimed for depreciation is subtracted from your purchase price to figure out your property’s “adjusted basis.” When you sell, the gap between the sale price and this adjusted basis decides your gain or loss—and, sadly, how much tax you owe.

• Depreciation Recapture: If you wrote off a lot of depreciation, you’ll probably have to pay “recapture” tax on that portion. For commercial property, this is usually taxed at a flat 25%—which can feel like a stomach punch if you’re not ready for it.
• Capital Gains Tax: Anything above the amount you depreciated gets taxed as long-term capital gains (usually at 15% or 20%, depending on your income). This is separate from the recapture part.

Don’t forget selling expenses. Things like broker commissions, legal fees, or even repairs done to help close the deal can reduce your final taxable gain. So, keep every last receipt.

Here’s a pro tip: If you use a 1031 exchange, you can defer paying all those taxes as long as you roll your profit into another qualifying property. This move isn’t automatic though—you have strict timelines and rules to follow.

If you’re not sure how all this plays out with your specific numbers, talk to a tax pro who’s seen this before. It’s way too easy to miscalculate and end up paying more tax than you need. Being smart about your write off commercial property moves during the sale can free up capital and save you headaches when that tax bill comes around.

Avoiding Common Write-Off Mistakes

Mistakes can eat into your savings fast—especially when you're trying to write off commercial property. Way too often, people leave money on the table, or worse, catch the IRS's attention by doing things wrong. Let's walk through key mistakes you’ll want to dodge.

• Forgetting to Separate Land from Buildings: The land itself isn’t depreciable, only the building is. If you lump them together, you’ll get the math wrong fast. Always split the purchase price between land and building—your tax prep software won’t do this for you.
• Missing Improvement Deductions: Replacing a roof, upgrading HVAC, or adding new windows? These usually count as capital improvements, which means you can depreciate them instead of treating them as instant expenses. Keep solid records for every upgrade.
• Overlooking Closing Costs: Legal fees, title searches, and certain commissions can be added to your property's basis. If you forget to include these, you're likely missing out on depreciation amounts over time.
• Not Reconciling Depreciation with Your Records: Maybe you claimed extra depreciation or skipped some in past years. That can trigger audits and headaches at sale time. Always match your depreciation records year to year.
• Mixing Up Repairs and Improvements: Quick fixes like patching a leak are usually deductible this year. Big projects that extend the property's life are capital improvements—don’t mix these up or you’ll mess up your expense and depreciation deductions.

Here’s a quick table showing mistakes investors make and what it can cost you:

Pro tip: Work closely with a tax pro who knows commercial real estate. The rules change, and there’s no substitute for specific advice. If you’re handling multiple properties or larger deals, this step alone can pay for itself—sometimes on just one missed deduction.

Next Steps: Planning Your Sale and Tax Strategy

If you want to make the most of your commercial property sale and keep your tax bill as low as possible, you need a solid plan ahead of time. It’s not just about closing the deal—it’s about timing, knowing what you can deduct, and making moves that save you money in the end.

First, put together all your paperwork for the property: purchase records, improvement costs, maintenance bills, prior depreciation schedules, and any expenses you’ve tracked. This will help your accountant spot every possible deduction and make sure you’re not missing easy wins.

• Consider timing the sale. If you’re selling late in the year, talk with your tax advisor to see if it makes sense to close this year or wait until next year based on your income situation.
• Review depreciation recapture rules. When you sell, you might have to pay tax on the write off commercial property benefits you claimed over the years. Getting a preview can help you avoid surprises from the IRS.
• Factor in any 1031 exchange possibilities. Swapping one property for another, instead of selling for cash, could push those taxes down the road and keep your investment working for you.

And here’s something most folks overlook: state and local rules. Your state might tax sales differently, or offer special credits, which can shift your entire strategy.

If you want a sense of how much tax you might pay after a sale, check out this example:

The numbers above are based on current federal rates (2025) with depreciation recapture at 25% and long-term capital gains at 20%. Your real numbers will depend on your own situation, but seeing how it all adds up pushes you to plan way before the final handshake.

Best move? Team up with a good tax pro early, sort through your options, and map out your whole year—not just the sale. Being proactive beats scrambling at tax time every time.