Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
As a resident or property owner in NYC, you’ve likely noticed that everything is much more expensive than in other parts of the country, especially all the different taxes. So it’s essential to know about any potential tax benefits you might have access to. And one of them is the NYC Cooperative and Condominium Tax Abatement program. That name may sound confusing. But it’s pretty simple to understand. So we’ve put everything together to make it as straightforward as possible so it’s easy for you to learn what it is. In this article, you’ll know what that tax abatement is. How it works. And how you can see if you or your building qualifies. So if you want to potentially learn about a way to save some money on your property, then keep reading to learn all about the Co-op Tax Abatement Assessment in NYC.
While it may seem a bit tricky to understand at first, a co-op tax abatement assessment in NYC is a pretty straightforward concept. The tax abatement assessment’s primary purpose is to allow co-ops and condominiums to create additional revenue. They use the savings for facility maintenance and improvements without directly charging the shareholders extra money. This additional revenue comes from New York directly as tax abatement.
The tax reduction goes to shareholders of the co-op or condominium once assessed the property value. New York City can then employ the tax abatement after determining the value and the property taxes are due. Authorities reduce the amount owed on property taxes depending on the assessed property value.
The co-op or condominium owner then collects these tax refunds. They use the money for maintenance and capital improvements, and the reduction in taxes is most commonly used for property owners. They collect the tax benefit issued using the New York Cooperative and Condominium Property Tax Abatement.
Property owners benefit from the tax abatement (or tax exemption), which provides them with a tax benefit from New York. This tax benefit is known as the “NYC Cooperative and Condominium Tax Abatement,” It applies to the average assessed value of the residential units within the entire property. The higher the average value, the smaller the reduction in property taxes the owners or shareholders will need to pay on the development.
The coop condo tax abatement helps individual apartment owners save 17.5% to 28.1% on their property taxes. It applies to level the playing field vs. 1-3 family homes taxed significantly lower. There are four tiers of average unit value:
These values are current as of 2021 and taken directly from the New York City Department of Finance. They’ve remained steady for years, so expect them to stay roughly the same for the foreseeable future.
Now that you know what the tax abatement assessment is and how much of a benefit to expect, let’s dig a little deeper into how the process works in NYC.
Property owners and shareholders cannot decide to perform a co-op tax abatement assessment independently. Only the Board of Managers (co-op board) can authorize the tax abatement assessment. When the board approves a co-op tax abatement assessment, owners of the property will see a pair of line items appear on their bank statements.
First, shareholders will receive a debit on their account, which is the amount of the property value assessment itself. The debit comes from the number of shares assigned to each unit, which gets proportionally distributed after that. Then property owners (or the shareholders) will receive a credit for the tax abatement.
The credit will be from the New York City Department of Finance. This credit will depend on the above percentages and values described.
The debit and credit amounts will come out to be the same due to the proration and accounting done by the city. Therefore shareholders or property owners will not have to pay additional money to the co-op once the tax abatement assessment has been processed and applied.
Many think that something fishy may be happening and that what’s happening is not legal. But in the case of co-op tax abatement assessments in NYC, they are perfectly legal and are becoming more common these days.
Co-op developments within the city can struggle to stay financially afloat. And these tax abatement assessments help them pay their bills and costs without going under. So yes, they are legal and often even encouraged within NYC.
Qualifying for a co-op tax abatement in NYC is complex, and not all buildings (even co-ops) will qualify. The property must meet the requirements before a building can qualify for the tax abatement. We will go over a summarized version of the conditions quickly here. You can check out the NYC Department of Finance for the complete list of what’s required to qualify.
If you don’t have a managing agent, perhaps because you live in a self-managed co-op or condo building, the NYC Department of Finance recommends that you call 311 or email them to learn how to apply directly.
Again, check with the NYC Department of Finance to confirm whether or not you and your building qualify for the tax savings.
Condos in NYC do not get to take advantage of the same tax abatement assessments that co-op developments have access to. This all comes down to how ownership of condos differs from co-ops and New York views the different development types regarding taxes and finances.
In a building full of condos, the individual condo unit owners themselves receive the tax abatement on their quarterly property tax bills. This prevents the condo board from using the tax abatement assessment because of their relative lack of power regarding tax advantages.
Individual condominium unit owners can check their quarterly property tax bills online or by looking at the mailed property tax bills.
If you have a mortgage, your bank will typically be responsible for paying property taxes on your behalf. When you have a mortgage, your bank may receive the paper property tax bill vs. you in the mail.
However, you can quickly check your property tax bill online at the link above. Input your full address, including the unit number.