Tax Strategies for Commercial Self-Storage Owners

Tax season is approaching, and as a self-storage facility owner, you may be overlooking powerful tax-saving strategies that could significantly reduce your income tax burden. The 179D Energy-Efficient Commercial Building Deduction represents one of the most valuable but underutilized opportunities for self-storage owners. This deduction rewards commercial property owners who implement energy-efficient building features, potentially providing substantial tax savings. Beyond 179D, recent Congressional discussions about reinstating additional tax benefits—such as 100% bonus depreciation, lower tax brackets, and R&D credits—make this an ideal time to review your comprehensive tax planning approach for your self-storage business.

Here are four key tax strategies that can help you maximize deductions and increase cash flow.

1. The 179D Energy-Efficient Commercial Building Deduction

Did you construct a new facility or make major improvements since 2006? If so, you may qualify for the Section 179D Energy Efficient Commercial Buildings Deduction.

This incentive, established under the Energy Policy Act of 2005, provides tax deductions for energy-efficient upgrades related to lighting, HVAC systems, and building envelope improvements. Depending on project scope and timing, you could receive deductions ranging from $0.60 to $5.81 per square foot.

Best of all, Section 179D can be claimed in addition to Cost Segregation and does not require amending previous tax returns. If you've made improvements, this could be a game-changer for lowering your tax liability.

2. De Minimis Safe Harbor & Routine Maintenance Safe Harbor

Many storage owners miss out on these valuable deductions under the Tangible Property Regulations (TPRs), enacted in 2014.

• The De Minimis Safe Harbor (DMSH) allows you to expense items under $2,500 rather than capitalize them.
• The Routine Maintenance Safe Harbor (RMSH) lets you expense items that are expected to be replaced more than once in a 10-year period—such as painting, flooring, or countertops.

For example, one self-storage owner planned to spend $200,000 repainting two facilities every nine to ten years. Instead of capitalizing the expense, they can deduct the entire amount in the current year—reducing taxable income significantly.

The TPR rules are very favorable to building owners but require careful compliance to avoid IRS scrutiny.

3. 100% Bonus Depreciation May Be Coming Back

Congress has recently proposed bringing back 100% bonus depreciation, which has been phasing out and is currently at 40% for 2025.

Bonus depreciation allows for immediate write-offs of assets with shorter tax lives, significantly reducing taxable income. Think of it as Cost Segregation on steroids—accelerating depreciation in one year instead of spreading it over 5, 7, or 15 years.

• Lower taxes this year
• More cash flow for business growth or acquiring new properties

4. Cost Segregation: The Key to Unlocking Tax Savings

Cost Segregation is an IRS-approved strategy that reclassifies building components to accelerate depreciation, increasing cash flow and reducing tax liability.

Beyond its direct tax savings, a Cost Segregation Study also helps ensure compliance with Tangible Property Regulations (TPRs) and other deductions mentioned above. By leveraging this strategy, you’ll maximize your tax benefits while staying in line with IRS rules.

Stay Ahead of Tax Changes

If your tax preparer hasn't mentioned these strategies, don't be too hard on them—tax regulations are complex and constantly evolving. However, applied correctly, these strategies can yield significant tax savings. CSSI has been helping commercial property owners implement these tax-saving strategies for over 20 years. Our engineering-based approach ensures you receive maximum benefits while maintaining full compliance with IRS regulations.

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