Philadelphia’s tax abatement has benefited not only current and new homeowners, but also the city and its finances. It creates jobs, encourages development, attracts new homeowners, benefits owners of existing properties and more. Some may be wondering, what is Philadelphia’s 10-year tax abatement exactly?
The tax abatement simply put means that if you make improvements to a piece of real estate in Philadelphia, you won’t have to pay the additional taxes the improvement causes until 10 years later. For example, if you own a home in Philadelphia that is currently valued at $150,000 and you want to redo your kitchen, which will increase the value of your home. After it’s finished, the city’s assessors come to the conclusion that your home is now worth $25,000 more, for a total value of $175,000.
With the tax abatement, the additional $25,000 value is not taxed until 10 years after the recalculation; therefore, you would be taxed as if your home was still worth $150,000 for another 10 years.
This can be extremely beneficial for new construction. A structure is seen as an improvement to a property. So, someone who owns newly built and abated property will only be taxed on the value of the land for the first ten years after the property has been built. This results in a significant tax break, considering the owner would only be paying 10-20% of what their tax bill would be without the abatement.