What is a Tax Abatement?
One Of Our Most Common Buyer Questions Answered!
The tax abatement was created to help spur growth & development in Philadelphia. The basic premise was to stimulate development through creating a demand for residential housing by offering a tax incentive to those purchasing.
This Does Not Mean You Pay NO Taxes…
The land or improvements have been assessed at some point in recent history. Whether the assessment is $100 or $10,000 (depending on the parcel’s size, location or existing improvements) that amount is frozen for 10 years. Let’s run through a few different scenarios
New Construction Built on an Empty Lot
This is usually where you will see the lowest tax rates as the assessment is for the ground ONLY, no improvements.
Significant Renovation of a Previously Dilapidated Structure
Tax rates for this depend on location & the amount of the assessed improvements. Since a structure was previously there & is either being knocked down or significantly renovated (by significant we mean usually just the preservation of the facade) there are assessments on those improvements. These assessments are usually significantly lower than the reassessment will be once construction is complete.
Buying a Condo in a High Rise
Tax rates for this can be much higher, especially in Center City, where land & buildings are at a premium. The developers either are building new construction or performing a significant renovation on an existing structure. In this scenario, the assessed value is then spread throughout the number of units depending upon percentage of ownership.
How Do You Get Your Abatement Approved?
The developers must apply within the proper time frame set forth by the O.P.A. (Office of Property Assessment; formerly the BRT). At closing, a document is given to the buyer that they must fill out & send to the O.P.A. for implementation. The developer can not have any outstanding tax bills with the City of Philadelphia. This can negatively effect the implementation of the abatement.
Our buyers agents are well versed in the proper language to add in to the purchase contract to protect our buyers.
If you have more questions about the abatement we can answer them for you! Just shoot us an email!