Abatements and Other Secrets to Reducing Your Property Taxes
Tax season is upon us and everyone wants to know how to keep their money instead of handing it over to The Man. While we can’t help you with your income taxes, if you own property in Philly you may be eligible for a tax abatement or exemption to save some scratch while you sleep.
There are 2 ways to reduce your property taxes:
- Abatements reduce taxes by applying credits to the overall taxes due.
- Exemptions lower the tax bill by reducing the property’s assessed value.
It’s a common misconception that tax-abated property owners pay nothing at all, or that the taxes can’t be raised when the abatement is in place this is not true. You always have taxes to pay (welcome to planet Earth) you are always subject to rising assessments and rising tax rates so it’s wise to stay informed about what the folks over in City Hall are up to.
There are many different types of abatements and exemptions available in Philly including those for Veterans and non-profits. Check out the city’s website here
Below we’re outlining the details on the four most common types of property tax relief available in the City of Brotherly Love and a few tips we’ve learned from owning and selling lots of all different kinds of homes in Philly.
1. New Construction Abatement
When a new home is built owners/builders can apply to have the taxes abated for 10 years. This means that the taxes are only paid on the land value and not the value of the structure or “improvements” saving a significant chunk of change over the 10-year period. When a brand new home is purchased that has never been lived in before, buyers should be careful to confirm that the abatement has been approved and know that they as the intended occupants will have to activate the approved abatement in their name after settlement; best done by making a quick trip to the abatement office to file the paperwork in person. That way they get not even 10 minutes less than 10 years of abatement benefits.
When a property is being sold that has already been occupied but still has time left on the abatement, no paperwork is needed to transfer the abatement; it stays with the property until it expires. Don’t take the sellers’ word for it though, it’s a good idea to call and confirm directly just how much time is left on the abatement by contacting the OPA’s abatement office at (215) 686-9200
Hit 4 for customer service (no, there is no way to check online yet but I’ve always been able to confirm with a quick phone call).
2. Renovation Abatement
If you decide to give your house a significant facelift thereby raising the overall value, it may be worthwhile to apply for a renovation abatement that essentially freezes the value of your home in a time capsule for 10 years based taxes on the on the pre-improvement value. Keep in mind that ordinary upkeep isn’t considered an improvement but if you have approved building permits with the stated value of the improvements, you can apply for a renovation abatement in the same calendar year as the permits were pulled. More info here.
3. Long Term Owner Occupants Program, Aka “Loop”
Homeowners who have occupied their homes for 10 or more years, meet income eligibility requirements, and have seen their assessments more than triple from one tax year to the next can apply to have their assessment “locked” for future years. Taxes could still go up if the tax rate goes up, but this program is specifically designed to help keep long-term owner-occupants from being taxed out of their homes across our rapidly appreciating city.
4. Homestead Exemption
This is the one that’s most widely available with the least requirements. As long as you own and occupy your home you are eligible for a Homestead Exemption. Essentially it lops $40,000 off the assessed value of the home (up from $30,000 in 2018). So, if the city has your house valued at $294,400 x the current tax rate of 1.3998% your taxes would be $559.92 a year cheaper with the exemption vs. without. I can think of a lot of things I’d rather spend that money on besides taxes!
The deadline to apply is usually in the 2nd week in September, once approved the exemption goes into effect the following calendar year and stays with the property as long as you live there. More info here.
A few Pro Tips
You can only have one type of abatement or exemption at a time. If you have a new construction abatement you cannot also have a homestead exemption, BUT the moment your 10 years is up you can immediately apply for homestead exemption.
If you refinance or change the deed to your home in any way, you may need to reapply.
The city can never do “spot assessments” and randomly raise taxes on one home at a time. Tax assessments are re-evaluated over larger areas of land. More info on how the Office of Property Assessment (OPA) values property here.
The City has been rapidly appreciating over the last several years, coupled with an effort from the city government to accurately evaluate its property stock and collect taxes for things like schools, fire trucks, public safety, and sanitation all is easier said than done but we are getting better every day.
If you feel that your property has been improperly assessed, you can appeal. More info here.