No one wants to pay a penny more in taxes than required. The good news for business owners is that they can start saving money with an asset review.
Commercial property taxes can significantly impact the bottom line for doctor's offices and medical clinics. Whether you're a sole practitioner or managing multiple clinics, you can benefit from learning how doctors can save money on property taxes.
In this post, you'll learn what business property taxes are and our top recommendations for how to decrease your tax bill.
WHAT BUSINESS PROPERTY TAXES DO DOCTORS PAY?
Before we review how doctors can save money on taxes, you'll need to understand business property taxes. Businesses pay two types of property taxes: real estate and personal property.
BUSINESS REAL ESTATE TAXES
Like how you pay property taxes on your home, your business pays taxes on any real estate the company owns. If you lease your office or clinic building, you may need to pay real estate taxes.
BUSINESS PERSONAL PROPERTY TAXES
If you operate in a state that collects personal property tax, your company pays taxes on non-real estate assets owned by the company. Business personal property includes things the company owns and needs to function or generate income.
EXAMPLES OF BUSINESS PERSONAL PROPERTY INCLUDE:
- Office furniture and fixtures
- Machinery and equipment
- Computer equipment
HOW ARE BUSINESS PROPERTY TAXES CALCULATED?
Property tax rules vary by state and sometimes county. Decoding your business property tax bills can be tricky. Your property value determines how much you pay for real estate taxes. A tax official, typically a county assessor, appraises real estate property by assigning an estimated market value for the land and any improvements, such as buildings. Multiply the value by your tax rate to determine your real property tax charges.
Determining business personal property taxes requires more calculations. Businesses pay personal property taxes based on depreciation schedules set by the state or the county. Unlike real estate taxes, where the county has a record of purchases, each business must submit a list of business personal property assets annually.
HOW DOCTORS CAN SAVE MONEY ON PROPERTY TAXES
Now that we've clarified what property taxes doctors pay, let's look at how doctors and other medical companies can save money on their commercial property taxes.
WATCH YOUR PROPERTY VALUATIONS
Each time an assessor reappraises your real property, you should receive a notification of the new value. Many people don't realize you can appeal the appraiser's decision. If the real estate market took a downturn or is stagnant, but the county significantly increased your assessed value, you should consider appealing. An inflated appraisal value costs the business more this year and in the future.
KNOW YOUR REGULATIONS
Tax codes and regulations differ by state and sometimes even by county or city. Doctors need to know the rules relevant to each of their locations. Working with tax professionals who understand business property tax regulations can ensure your company doesn't pay more than you should.
CATEGORIZE PERSONAL PROPERTY CAREFULLY
In addition to ensuring the correct categorization of real and personal property, companies need to review the equipment categorization for personal property carefully. The category determines the deprecation schedule. A tax professional's review ensures your company lists equipment in the most accurate and tax-efficient category. Categories with short lifespans have accelerated depreciation schedules, so you pay less tax.
CLEAN UP YOUR ASSET LISTING
When you submit your business personal property asset list each year, look for items no longer in use. From idle equipment to things you've sold or thrown away, companies often keep these "ghost assets" on their books for years. You should not pay taxes on something you don't own.
An asset review also helps doctors' offices with multiple locations or who recently merged with another practice. The same piece of equipment often gets listed in several locations. Removing duplicate listings significantly decreases your tax liability.
GETTING HELP SAVING MONEY ON BUSINESS PROPERTY TAXES
The team at Sharon Lyall, CPA, helps doctors and other business owners save money on their business property taxes. Our team will review your current tax bills and asset listings to see if we can identify any potential savings. Contact us today to schedule an introductory consultation.