USA – NORTH CAROLINA Law and Practice Contributed by: John Livingston and Brittani Miller, Kilpatrick
For rental property, foreign investors earning rental income from the real estate are subject to federal income tax and there are no exemptions. 8.5 Tax Benefits Commercial properties may qualify for depre - ciation deductions, allowing owners to offset business income by depreciating the cost of the building over time. Property taxes paid on commercial real estate are generally deduct - ible as a business expense at both the federal and state levels, and mortgage interest on loans used to acquire, construct or improve commer - cial properties may be deductible as business
expenses. Gains from the sale of commercial properties may be subject to federal and state capital gains taxes, but owners may be able to defer these taxes through a 1031 exchange by reinvesting proceeds into similar real estate. Operating expenses, such as repairs, property management fees, utilities, insurance premiums and advertising costs, may also be deductible. There may also be tax credits available in cer - tain circumstances such as low-income housing, historic rehabilitation and qualified opportunity zones. Specific tax circumstances should be reviewed with accountants and tax attorneys.
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