What’s Going on With Philly’s 10 Year Tax Abatement?
Philly’s 10 year tax abatement has been around for more than 20 years and has led to a real estate development boom. But the current program is ending and a new version will take its place. You can still take advantage of it, don’t miss this opportunity!
What is the 10 Year Tax Abatement?
The 10 year tax abatement as we know it today was formed in 2000 to encourage development, revitalize communities, increase affordability and boost the local economy. It’s a tax break for new or rehabbed construction.
For owners of new construction properties: under the abatement these owners only pay taxes on the value of the land underneath the buildings for ten years. In Philadelphia, the land and the improvements on the land have separate values. So for 10 years, you only have to pay taxes on the value assigned to the land.
For owners of rehabilitated properties: under the abatement these owners are exempt from paying taxes on the value of the improvements. You will only be taxed on the value of your home before you did any upgrades for ten years.
This program has led to a decades long construction boom in Philly and has saved property owners loads of money while increasing affordability. But city officials approved changes that will phase out the abatement and have a reduced.
When Will the Abatement End? And Can You Still Take Advantage of it?
Owners who want to take advantage of the 10 year tax abatement need to get their applications in by the end of the year - December 31, 2021. If. you get it in by then, you can still get the 100% tax abatement for all 10 years.
But here’s the plan to phase it out - owners who apply after January 1, 2022 would receive the full 100% during the first year, but it would decrease by 10% each year for 10 years until you’re paying the full tax amount.
What Does this Mean for you as a Buyer?
If you purchase a new construction home before the end of 2021, you’ll be granted the full 10 year tax abatement on the value of the building for 10 years.
A tax abatement increases your affordability. You could qualify for a higher value home because you’d be saving thousands of dollars with the abatement.
If you are purchasing a new construction home, here are 3 things you need to make sure of:
The builder has acquired a proper permit for tax abatement
The agreement of sale mentions the 10 year tax abatement
You have all tax abatement transfer documents at closing
What Does this Mean for you as a Seller?
If you have more than 3 years remaining on your tax abatement, you might want to consider selling your home now. Homes with remaining tax abatement will have an added value in the Philadelphia market especially in 2022 once the reduction program has started.
Are you interested in learning more about how you can take advantage of the 10 year tax abatement program? Contact us today!