Many new buildings offer property tax abatements that range from 5 to 25 years, meaning that you will owe no property tax or only a specified fraction each year until the program expires and you rejoin the highly taxed herd.
A few points about abatements:
- The longer abatements tend to be located in emerging neighborhoods like Upper Manhattan and certain parts of Brooklyn.
- Make sure you understand the phasing-in schedule: You may owe zero taxes for 10 years, then 25% of “normal” taxes in year 11, 50% in year 12 etc. A rapid phase-in can be a financial shock.
- Make sure you have a realistic sense of your actual tax burden once the abatement expires. Understand that the dizzyingly high number that the offering plan says will be your tax at the expiration of your abatement is based on current tax rates and assessed property values. Your actual number in 7, 14, or 25 years is likely to be much higher as tax rates and assessed values continue their inevitable climb.
- Don’t assume you are going to sell in Year 7 in the event your income can’t keep up with your taxes. Many of your neighbors may have the same idea—and the competition will make it harder to sell for the price you need.
- As a general rule of thumb, don’t spend up because you have an abatement: Buy the apartment you could afford if there were no abatement.