Philly's 10-Year Tax Abatement

Philly's 10-Year Tax Abatement

Philadelphia’s 10-year tax abatement is ending, and a new version will be taking its place from January 1, 2022. But you can still take advantage of the program before December 31, 2021!
Philly’s 10-year tax abatement program was enacted in 2000 to encourage development and redevelopment, increase affordability, and boost the local economy. Simply put, it offers a tax break for buyers who are purchasing new or rehabilitated construction.
The former program allowed for 10-year abatements on new construction homes as well as partial abatements for rehabbed homes. In Philadelphia, the land and the improvements on the land hold separate values, so under the new construction abatement, owners only pay taxes on the value of the land for 10 years; they are not taxes on the building itself. Owners of rehabbed properties are only taxed on the value of the home before any upgrades for 10 years; they are not taxed on the improvements.
This tax abatement program has led to a construction boom in Philly for over 20 years and has helped property owners save while increasing affordability. However, city officials have approved changes that will phase out the abatement and have it reduced.
In order to take advantage of the former 10-year tax abatement program, owners need to submit applications by December 31, 2021. Owners who apply after January 1, 2022, will receive the full 100% during the first year, however, each year the abatement will decrease by 10% until the full tax amount is reached.

What this means for Buyers:

  1. 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.
  2. You could qualify for a higher-value home because you’d be saving thousands of dollars with the abatement.
  3. If you are purchasing a new construction home or a rehab, you will want to make sure the builder has acquired a proper permit for tax abatement, the Agreement of Sale mentions the 10-year tax abatement, and you have all tax abatement transfer documents at closing.
  4. Homes purchased with an abatement submitted by the previous owner after December 31, 2021, will be subject to the new program.

What this means for Sellers:

  1. If you have more than 3 years remaining on your tax abatement, you might want to consider selling your home now.
  2. Homes with remaining tax abatement will have an added value in the Philadelphia market once the reduction program has started.

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