Read This Before You Build!

4 Replies

When should you start tax planning on a building? A lot of people think the tax planning starts once the building is completed. However, you can actually save millions of dollars in taxes by starting during the blueprint phase.

Here are some examples of ways to save on taxes:

  • For conference rooms in a hotel, Instead of installing regular walls, if you install moveable walls, the walls could be depreciated using the rules of bonus depreciation.
  • For a multi-family apartment complex, changing the model of the bathroom exhaust fan to a variable speed could help qualify for the energy credit which is $2,000/unit.
  • For a large apartment complex, installing a ceiling fan could allow you to qualify for 45L tax credits.
  • For a hotel, if the porte-cochere is detached from the hotel building, it could be fully deductible in year one as it could be considered a land improvement. Otherwise, this carport would be depreciated over 39 years with the hotel building.
  • In an office building, instead of installing a permanent flooring such as glued down wood or tile, install flooring that is considered personal property such as luxury vinyl planks or carpets.

These are just a few of the many ways that tax planning before construction can save you money. As always, be sure to contact your accountant to make sure these situations apply to your property!

Have you utilized tax planning strategies in the blueprint phase?

Julio! Great post. I do residential build to rents and have been searching these forums for people that think like you. Great ideas on thinking ahead to maximize the benefits. Of course, we have a couple less zeros in what we do, but it give me more to think on. 

We're fans on plank floors, as they are superior to carpet and qualify as 5 year property. Utilizing cost seg is a must do in my opinion, certainly with larger jobs too. 

Thanks for the share - we need to find a spot on this place to interact with people actively doing build to rents and actively developing land....  done them both, but sadly here it seems like most are asking questions about doing their first one... I don't mind helping people too, but it would be nice to have a tribe of people that have built a bunch of them!

Ed

Originally posted by @Ed O. :

Julio! Great post. I do residential build to rents and have been searching these forums for people that think like you. Great ideas on thinking ahead to maximize the benefits. Of course, we have a couple less zeros in what we do, but it give me more to think on. 

We're fans on plank floors, as they are superior to carpet and qualify as 5 year property. Utilizing cost seg is a must do in my opinion, certainly with larger jobs too. 

Thanks for the share - we need to find a spot on this place to interact with people actively doing build to rents and actively developing land....  done them both, but sadly here it seems like most are asking questions about doing their first one... I don't mind helping people too, but it would be nice to have a tribe of people that have built a bunch of them!

Ed

Thanks Ed, I appreciate that! Plank floors are a great idea to maximize depreciation. Please let me know if you ever have any questions or if I can be of any help!

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Great mindset Julio,

I love being proactive in regards to taxes as opposed to reactive like so many folks do.

I have not previously thought of any of your mentioned suggestions. Great tips! I just finished a ground up 7 townhome development and wish I would have came across this post prior and will definitely be applying such a mindset going forward on upcoming builds. Would you mind if I reach out during design phase to pick your brain? Team work makes the dream work!

Thanks, have a great day!!