Know All About Metal Building Tax Deductions

Many people across the world install metal structures for various reasons. And many don’t know that metal buildings can help them save thousands of dollars in taxes. Whether they are business owners, farmers, or commercial property owners, they can claim a tax write-off if their steel structures qualify for it.

Under Section 179 of the IRS tax code, businesses can deduct up to 1.22 million dollars of the cost of a building in the first year. So, if you buy a metal garage, barn, or any other structure worth $50,000, you could write off the entire amount. You do not have to wait for decades to recover cost through depreciation.

And it doesn’t stop there. Bonus depreciation, energy-efficient tax credits, and accelerated depreciation under MACRS are also there. They make metal buildings even more tax-friendly.

So, whether you are setting up a farm barn, a commercial warehouse, or a rental unit, you could reduce your taxable income significantly.

But how do these deductions work? And who qualifies for them?

We have discussed and explained everything you need to know about metal building tax deductions in the space below. You can also learn how to claim them and maximize your savings by the end of the blog.

Understanding a Metal Building Tax Deduction

First, let’s understand what a building tax deduction is. When you buy a building for commercial and business purposes, you can claim a tax deduction at the end of the year. For this, you need to explain why you need a tax deduction.

What Are Tax Deductions?

Tax deductions reduce the amount you have to pay as tax. For example, if your business earns $100,000 a year and you qualify for a $50,000 deduction on a metal building, you will only be taxed on $50,000 instead of the full $100,000. This deduction helps businesses lower their tax burden and save money.

You can apply for the tax deduction because of operations-related expenses if you run a business. And buying a new building also comes under business expenses. Metal buildings used for business, farming, storage, or other commercial purposes often qualify for these deductions.

However, you should not get confused between tax deductions and tax credits.

Tax Deductions vs. Tax Credits: What’s the Difference?

Many people confuse tax deductions with tax credits, but they are not the same. Deductions reduce the overall taxable income, while credits directly lower the tax you pay.

• Tax Deductions lower the amount of taxable income. For example, if your taxable income is $100,000 and you claim a $20,000 deduction, your new taxable income becomes $80,000.
• Tax Credits directly reduce the amount of tax you owe. If you owe $10,000 in taxes and qualify for a $2,000 tax credit, your final tax bill drops to $8,000.

Common Misconceptions About Metal Building Tax Benefits

People are often scammed and ignored because of their lack of information and myths prevalent among them. Knowing them will help you put the proper steps ahead.

There are several myths about tax deductions for metal buildings. Here are some common ones:

Myth 1: Only Traditional Buildings Qualify

Many people assume that only traditional brick-and-mortar buildings are eligible for tax deductions. However, prefabricated steel buildings used for business purposes also qualify for deductions under Section 179 and Bonus Depreciation.

Myth 2: You Can Only Deduct the Full Cost Over Many Years

You do not have to wait for years to deduct the full cost. Section 179 allows businesses to deduct up to $1.22 million in the first year (for tax years beginning in 2024). It will enable businesses to invest more in metal buildings.

Myth 3: Personal-Use Metal Buildings Qualify for Deductions

If a metal building is used solely for personal use, like a backyard shed or home storage unit, it usually does not qualify for business-related tax deductions. However, you may be eligible for deductions if it’s used for a home-based business, rental property, or farming.

Types of Tax Deductions for a Building

Have a look at the crucial types of tax deductions and analyze which category your structure fits the best.

Section 179 Deduction

Under this section, you can claim a full deduction of the metal building cost in the first year. It’s for the tax years beginning in 2024, and the expense deduction is $1.22 million. Businesses using the building for commercial, industrial, or agricultural purposes can qualify for it.

Bonus Depreciation (For new and used structures.)

This type of tax deduction applies to new and used structures. The current deduction is 60% of the building cost, phasing out by 2027. It is great for businesses that exceed the Section 179 limit.

Standard Depreciation

Standard depreciation is based on a modified accelerated cost recovery system (MACRS). It applies if Section 179 or bonus depreciation is not used. The depreciation period is 39 years for commercial metal buildings like warehouses, offices, and rental properties and 20 years for agricultural metal buildings like barns and storage sheds.

Energy Efficiency Tax Credits (Encourages green building practices.)

You must have understood with the name that this type of deduction applies to eco-friendly structures. It encourages businesses to follow sustainable practices. 179D energy efficient deduction is available for companies upgrading insulation, HVAC, or installing solar panels. Additionally, the Solar Investment Tax Credit (ITC) offers a 30% credit for solar panel installation on metal buildings.

Who Can Qualify for Metal Building Tax Deductions?

Not everyone can claim a tax deduction on a prefab structure. The IRS has specific rules about who qualifies based on how the building is used. We have curated a list of people and businesses that can claim a tax write-off.

• Business Owners: If you use the metal building for operations, manufacturing, or office space, you may qualify under Section 179.
• Agricultural Businesses: Structures used for storing equipment, livestock, or crops can often come under the tax deduction criteria.
• Rental Property Owners: If you install a metal building as a rental unit or storage facility, then you can also qualify for tax redemption.
• Nonprofits & Organizations: Some nonprofit groups and organizations also use pre-engineered structures. They may also be eligible since they use them for public services or community programs.

But before you claim any deductions, check the IRS rules thoroughly and consult an expert who can also guide you throughout the process.

How Do the Size, Purpose, and Type of a Building Affect Tax Deductions?

These three factors, building size, purpose, and type, affect the claim for tax deduction. Let’s understand them in depth.

1. Size of the Building

What should the structure size be so you can qualify for a tax redemption? For tax years beginning in 2024, you know the amount for claiming for tax deduction. However, if the property exceeds $3,050,000, the deduction begins to phase out. This means larger buildings with higher costs may not fully benefit from Section 179 deductions.

2. Purpose of the Building

If you want to use the structure as mentioned below, you can qualify for the tax redemption.

• Business Use: Buildings used exclusively for business purposes are generally eligible for depreciation deductions. If exclusive use is not possible, at least 50% of its use should be dedicated to income-generating activities like farming or leasing.
• Mixed-Use (Personal and Business): If a building is used for personal and business purposes, then only the portion you use for business will be considered for tax deduction. For example, if 30% of a building is used for business, only that portion’s cost is eligible for tax deduction.
• Home Office Deduction: If you use part of your home as a principal place of business, a home office deduction may be available. But you must use the space exclusively and regularly for business.

3. Type of Building

Often, people make some improvements to the existing structure. They make it capable of business use. Improvements made to the interior of buildings may qualify for accelerated depreciation. Usually, buildings depreciate over 39 years, but QIP allows you to write off these improvements much faster, often within 15 years or even sooner using bonus depreciation.

If you invest in energy-efficient components, you may qualify for deductions under Section 179D. This section includes deductions for energy-efficient commercial building property. Agricultural steel structures, commercial metal buildings, rental property, and retail and office buildings can come under the tax deduction.

How to Claim a Metal Building Tax Deduction?

You have to follow some steps to claim a tax deduction on your prefab building. Go through the steps in the space below.

Step  1: Determine Eligibility- Ensure the building you want to buy should be used for business purposes or another qualifying purpose.
Step 2: Keep Proper Documentation- You should be ready with all the necessary documents vital for claiming a tax deduction. Save invoices, proofs of construction costs, and business use and expenses records.
Step 3: Apply the Right Tax Code- Use section 179, Bonus Depreciation, QIP, Energy Efficiency, or Standard Depreciation per your needs.
Step 4: File the Correct Tax Forms- Use IRS Form 4562 for depreciation and deductions.

Contact a tax professional once you know everything about the metal building tax deduction. They can help you ensure compliance and maximize savings.

Can Used Metal Structures Qualify for Tax Deduction?

Till now, you have learned that buying a new steel structure can qualify for tax redemption. But what if you want a tax deduction on an existing structure? Is it possible or not?

Yes, it is. Used metal structures can qualify for tax deductions, but with some limitations. As you know, Section 179 allows only newly purchased steel barns, garages, sheds, and commercial steel structures. However, if your structure is considered Qualified Improvement Property (QIP) or meets depreciation rules, it may still be eligible for write-offs.

Maximize Tax Deduction [5 Ways]

Now you know which structures can be eligible for tax deductions. However, many still often cannot succeed in getting tax redemption benefits. If you want to ensure your structure’s eligibility, plan it from the initial stage and maximize your building’s chances of becoming eligible for tax redemption. You can use the 5 ways presented below.

Choose the Right Type of Structure from the Start

From the very beginning, pick a structure that can help you qualify for the tax deduction. For example, ensure the building is for business purposes and is classified as Qualified Improvement Property (QIP), or meet IRS standards for Section 179 eligibility. When you choose a prefab metal structure designed for business use or commercial purposes, it increases your chances of maximizing deductions.

Make Energy-Efficient Improvements

If you install energy-efficient systems like LED lighting, advanced HVAC, or insulation, it can significantly boost your chances of qualifying for tax benefits under Section 179D. It is because they help in saving energy. These green upgrades make your building eligible for deductions for energy-efficient commercial property and lower your overall tax burden.

Take Advantage of Bonus Depreciation

Even if you buy a used metal building, you might still qualify for a big tax deduction in the first year. This is because bonus depreciation allows businesses to deduct a large portion of an asset’s cost. So you do not have to wait for decades to claim deductions. You can even write off a large part of the used structure within the first years. You might think it’s a trivial process, but it can be a smart financial move for businesses looking for savings.

Maximize Section 179 Deduction

Tax deductions majorly depend on Section 179. Keep all the criteria of this section to qualify easily. As you know, it allows a one-time deduction of the full purchase cost of the building; you must ensure your building is purchased, installed, and put to service in the same year. Use it primarily for business. It’s the best way to get immediate tax relief.

Document All Expenses and Improvements

Claiming for tax deductions can fail if you don’t have proper documentation and reasons. This is why you need to keep detailed records of all expenses related to construction, maintenance, and upgrades to your steel building. Keep cost records of material purchase, installation, and improvements. It will make it easier to qualify for deductions. Having the guidance of a tax advisor will further smooth the process.

Secure Your Business with a Trusted Metal Structure Provider

Buying a strong and durable steel structure is crucial to becoming eligible for tax deductions. This structure is going to help you in your business growth, so you should buy it from a reliable dealer. Viking Steel Structures is a renowned dealer across various industries that need durable steel structures. We use the best quality material for building construction, making it capable of withstanding many seasons and harsh weather conditions. Our team understands your needs thoroughly to offer you what you asked for.

You can also contact us for advice on the tax deduction process and how to qualify for it. Use this number 877-801-3263 to contact us and unlock the first and most crucial step towards business success.