What is the 10 Year Tax Abatement?
Simply put: if you make physical improvements to a piece of real estate in Philadelphia, you don’t have to pay additional taxes on the value of those improvements for ten years. For example, if you remodel your kitchen, and the City’s assessors determine that this remodel increases the value of your home by $25,000, you don’t pay taxes on that $25,000 until after ten years.
For new construction, the benefit can be quite substantial. Since a structure typically represents 80-90% of the property’s total value (with land representing the remaining 10-20%), the entire structure represents an improvement to the property. As such, the owner of a newly built and abated property only pays taxes on the value of the land for the first ten years after the property has been developed. Consequently, their tax bill is only 10-20% of what it would be otherwise; a significant break.
While critics of the Abatement like to portray this break as unfair, they ignore the fact that the Abatement encourages new construction and rehabilitation of properties in many Philadelphia neighborhoods. The Abatement has worked to revitalize communities, provide well-paying construction jobs, attract and retain residents, attract home- and business-owners to the city of Philadelphia, and reduce development costs for commercial and residential projects.