What’s Going on With Philly’s Tax Abatement in 2023?

What is the 10 Year Tax Abatement?

The Philadelphia property taxes are comprised of two components: land and improvement (anything that’s not the land itself, ie. your actual house). Any new improvements have their assessed values 100% abated for 10 years, meaning no taxes are paid on those values. This means new construction from the ground up has its entire “improvement” value abated since the entire structure is new.
For owners of new construction properties: under the abatement these owners only pay taxes on the value of the land underneath the buildings for ten years. In Philadelphia, the land and the improvements on the land have separate values. So for 10 years, you only have to pay taxes on the value assigned to the land.
For owners of rehabilitated properties: under the abatement these owners are exempt from paying taxes on the value of the improvements. You will only be taxed on the value of your home before you did any upgrades for ten years.
This program has led to a decades long construction boom in Philly and has saved property owners loads of money while increasing affordability. But city officials approved changes that will phase out the abatement and have it reduced.

On January 1, 2022, any abatement applications that were submitted and approved had their improvement value abated 100% in year 1, but gradually reduced by 10% over 10 years until it reached 0%. Applications that had been submitted before this date still had the original 100% abatement structure for all 10 years.

New Construction Properties For Sale:

The tax abatement applies to new construction or major renovations on residential properties.
The program exempts property owners from paying property taxes on the increased value of the property for 10 years, providing significant savings on property taxes.
The tax abatement program can make purchasing a new home or renovating an older one more financially feasible for some buyers.
If you are purchasing a home with a new abatement, here are 3 things you need to make sure of:
1. The agreement of sale mentions the 10-year tax abatement
2. The builder has acquired an approval from the city for the tax abatement
3. The buyer receives a form at closing that must be submitted to the city OPA office

Sellers can potentially sell property at a higher price due to tax savings for buyers.
Tax abatements are an incentive for buyers to purchase homes in Philadelphia.
Reduces holding costs for sellers while their property is on the market