Business-Related Property Tax Deduction Is at Risk

Numerous media outlets have reported that lawmakers are under significant pressure to identify revenue offsets to finance a growing list of priorities in their fiscal and tax package.

One such potential offset is the elimination or limitation of the business-related property tax deduction. This potential change in tax law has sparked concern, as a change to property tax deductibility could have significant consequences for commercial real estate owners, developers, and investors.

Current tax treatment of business-related property taxes

Under existing tax law, businesses can generally deduct property taxes on real estate used for business purposes as an ordinary and necessary business expense. This deduction is a fundamental component of tax policy and prevents businesses from being taxed twice — once on the value of their property and again on the income generated from it. For many companies — particularly those in real estate, manufacturing, and retail — property taxes represent a significant line item.

What’s at stake?

If Congress eliminates or limits the business-related property tax deduction, business owners may face increased tax burdens, especially in states with high property tax rates where the deduction helps mitigate operational costs. This change could result in reduced operating margins and cash flow for businesses, decreased real estate investment and development, higher costs passed on to consumers or tenants, and increased geographic tax disparities.

Policymakers should carefully consider the broader economic consequences before making changes to this longstanding deduction, as it currently provides financial relief, frees working capital for reinvestment, and supports job creation and expansion.

Call to action

Real estate professionals and business owners are encouraged to contact their congressional representatives to express their concerns and advocate for the retention of the business-related property tax deduction. Their voices can make a difference in shaping the future of tax policy and promote a favorable business environment for all.