developers unable to find a suitable site to build on–especially in urban areas.
And with conversions come many changes to the property in order to make it
suitable for the operation of the self-storage business. Fortunately, tax breaks, both
routine and unique, are available to help offset the cost of converting commercial
properties to the needs of the self-storage operation.
Among the tax breaks available to those in the self-storage industry are special
deductions for rehabilitation expenditures. In fact, in some areas, the cost of rehabilitating
or fixing-up a qualifying building can qualify for tax credits—a direct reduction of
the operation’s tax bill rather than a deduction from income when computing that tax
bill. Also available are a number of special tax incentives created by our lawmakers to
encourage the development of economically distressed areas by locating businesses
in so-called “empowerment zones,” renewal communities and the District of Columbia
Enterprise Community Zone.
Basic Conversions
Additions and improvements to any building, including the building’s structural components, are usually depreciable under the Modified Asset Cost Recovery System
(MACRS) in the same manner in which the existing building is depreciated. That can
mean a recovery period of as long as 39 years.