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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.

2021 Guide to NYC Cooperative and Condominium Tax Abatement

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As a resident or property owner in NYC, you’ve likely noticed that everything is just so much more expensive than other parts of the country,2021 Guide to NYC Cooperative and Condominium Tax Abatement 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.

What is a Co-Op Tax Abatement Assessment?

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 for facility maintenance and improvements without directly charging the shareholders any extra money. This additional revenue comes from the city of New York directly in the form of a tax abatement.

The tax abatement 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. 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.

What is the NYC Cooperative and Condominium Tax Abatement program?

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 is based on 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:
  1. $50,000 or less — 28.1% tax benefit
  2. $50,001 to $55,000 — 25.2% tax benefit
  3. $55,001 to $60,000 — 22.5% tax benefit
  4. $60,001 or more — 17.5% tax benefit

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.

How does a Tax Abatement Assessment Work in NYC?

Property owners and shareholders cannot decide to perform a co-op tax abatement assessment on their own. 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 that appears comes from the number of shares assigned to each unit. This 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.

The Legality of a Co-Op Tax Abatement Assessment in NYC

Many people think that something fishy may be going on 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.

Who Qualifies for a NYC Co-Op Tax Abatements?

Qualifying for a co-op tax abatement in NYC is not easy, 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 precisely what’s required to qualify.

What if you don’t have a managing agent?

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.

Requirements for the co-op tax abatement in NYC include:

  • Co-op boards must notify the Department of Finance of any changes in ownership by February 15.
  • The co-op unit must be the owner’s primary residence. Shareholders must inform the board if the unit is their primary residence.
  • You must have purchased the unit before January 5 to receive the abatement for the upcoming year.
  • Co-op owners cannot own more than three residential units per development.
  • Property classified as a Class 2 property.
  • Properties that are part of the Urban Development Action Area Program do not qualify.
  • Units owned by a business (including LLC) do not qualify.
  • Properties help by sponsors or their successors in interest do not qualify.
  • Units owned by a trust are only eligible for tax abatement in certain circumstances.

Again, be sure to check with the NYC Department of Finance to confirm whether or not you and your building qualify for the tax savings.

Why Dont Condos Have the Same Tax Abatement Opportunities as Co-Ops?

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 is different from co-ops. New York views the different development types when it comes to 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.

How can condo owners check whether they’ve received the tax abatement?

Individual condominium unit owners can check their own 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 easily check your own property tax bill online in the link we provided above. Input your full address, including the unit number.

Written By: Georges Benoliel

Georges has been working in Wall Street for the last 16 years trading derivatives with hedge funds. He has been an active real estate investor for over a decade. Georges graduated from HEC Business School in Paris and holds a master in Finance from ESADE Barcelona.

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