Today, I want to guide you through the lessons I picked up in small CRE deals, not just how to market properties but how the right tactics can make even modest listings stand out and sell.
Today, I want to guide you through the lessons I picked up in small CRE deals, not just how to market properties but how the right tactics can make even modest listings stand out and sell.
Today I want to show you not just that depreciation is a deduction but how it can significantly shape the financial results of your CRE investments.
Early in my commercial real estate career, I thought the game was simple: a client buys well-located properties for a fair price, collects rent, and sells for profit.
It didn’t take long for Uncle Sam to teach me there’s another critical piece: tax strategy.
Over the years, after working with CPAs, making my own mistakes, and sitting across the table from some seasoned real estate investors, I learned that how you handle taxes on your commercial properties often determines your financial success.
Today, I want to guide you through the tax strategies every commercial property agent should know so your client does not just win big on paper but wins big in their bank account too.
Depreciation is the IRS’s way of acknowledging that buildings wear down over time.
But here’s the beautiful part: Depreciation may be claimed as a tax deduction even if your property is appreciating in value!
For commercial real estate, the IRS uses a 39-year straight-line depreciation schedule. That means each year, 1/39th of the building’s value (not the land) may be deducted from your client’s taxable income.
Example:
Your client bought a $2M office building.
Land value: $400K → Building value: $1.6M
Annual depreciation deduction = $1.6M ÷ 39 = ~$41,000 a year.
That $41K reduction is your client’s taxable income year after year, even while rents were rising.
If you want to supercharge your client’s tax savings, listen carefully: cost segregation studies can be your best friend.
Instead of treating the entire building as a 39-year asset, a cost segregation study breaks it down:
Many of these components qualify for faster depreciation schedules (5, 7, and 15 years).
And thanks to the Tax Cuts and Jobs Act (TCJA), your client may be able to take bonus depreciation, meaning a 100% write-off may be arranged on certain short-life assets in Year 1.
Example:
On a $1M small strip center, a cost segregation study might help your client claim an extra $250,000 in depreciation deductions immediately.
Stat:
According to the Journal of Accountancy, cost segregation studies may increase cash flow by 5%–10% in the first five years of ownership.
One of the greatest tools we have in CRE is the 1031 exchange.
It allows your client to defer paying capital gains taxes when they sell their property, if your client reinvests the proceeds into another “like-kind” property.
Example:
Your client sold a building for a $500,000 gain, then their CPA asks “Do you want to cut the IRS a six-figure check or roll it forward into something bigger?”
Say, for example, your client chose the exchange, and that single move helped your client upgrade from a small office condo to a 15,000-square-foot industrial property.
Key Rules:
Pro Tip: Start planning your client’s 1031 exchange months before they sell. Nothing’s worse than scrambling for a replacement and making a bad investment under deadline pressure.
If you’re looking to defer and reduce capital gains for your client and your client has a long-term investment horizon, Opportunity Zones are worth exploring.
Created by the 2017 TCJA, Opportunity Zones offer:
Example:
You advised a client who had a big capital gain from selling a small apartment building.
Instead of paying immediate taxes, he rolled the gain into a retail development project in a designated Opportunity Zone.
Now, he’s on track to wipe out millions in future taxes if he holds it for 10 years.
Stat:
According to Economic Innovation Group, over 8,700 Opportunity Zones have been designated across the U.S.
Warning:
Not every OZ deal is golden.
Do your due diligence and work with experts.
Let me be real with you: one of the biggest (and most expensive) mistakes some clients make is buying a commercial property in their own name. I get it. It feels simpler, faster, and “good enough.”
But here’s the truth: how your client owns their property is just as important as what they bought.
There are cases where clients bought promising properties, only to face lawsuits or tax headaches later simply because they didn’t take time to structure ownership properly. The fix? Think like a business from day one.
Here’s What I Tell My Clients, and You Should Too:
Why It Matters (Way More Than You Think)
The right structure can help:
The wrong structure? It can cost your clients dearly in taxes, legal fees, and stress.
Example:
Your client bought a small mixed-use building under her personal name. Everything went smoothly until a slip-and-fall accident turned into a lawsuit. Your client’s personal assets were suddenly at risk. If she used an LLC, she could’ve kept her personal wealth out of it.
Pro Tip: Before you close a deal for your client, even if it’s a small one, sit down with a real estate-savvy CPA and attorney. Spend a little now to save a lot later for your client. This is how real estate pros operate.
Sometimes, it’s better not to take all the sales proceeds at once.
Installment sales (seller financing) let your client spread income and tax liability over several years.
Example:
Your client sold a $1.2M small retail center and agreed to finance $900K over 5 years.
Instead of one massive tax bill, your client reported gains proportionally each year.
Bonus:
Your client earned interest on the financed amount, boosting his overall returns.
Stat:
The IRS governs installment sales under Section 453. But your client has to plan carefully to qualify.
A good tax strategy isn’t just about moves your client makes at year-end.
It’s a year-round mindset.
You and your client should track:
When tax season comes, your client is ready, and his/her CPA can work magic without scrambling.
Final Thoughts
In commercial real estate, smart tax strategy isn’t a luxury it’s a core part of building lasting wealth for your clients.
Every dollar your client saves in taxes is a dollar they can reinvest, grow, and protect.
It’s how good CRE investors become great CRE investors.
Remember:
Trust me:
Real wealth isn’t what your client earns it’s what they keep.
Don’t leave your client’s tax planning to chance. Build it into your CRE game plan for them from day one and watch their portfolio and peace of mind grow.
As a Licensed Associate Real Estate Broker, I always stress the importance of working with a qualified tax professional. The tax landscape in CRE is complex—from depreciation schedules and 1031 exchanges to capital gains and opportunity zone incentives. I’ve seen investors lose out on thousands, sometimes millions, simply because they didn’t structure a deal correctly or overlooked a tax strategy. A great tax advisor isn’t just there at tax time—they’re a key part of your investment team, helping you plan ahead, stay compliant, and keep more of what you earn. If you’re serious about building wealth in this industry, don’t go it alone—get a pro on your side.
At CRE Content Pro, we help commercial real estate brokers turn industry expertise into market authority. If you’re ready to position yourself as a tech-savvy thought leader and drive real results, let’s create content that elevates your brand and closes more deals.
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