NYC residential tax abatements: all you need to know (421-a, J-51)

New York City offers several different tax abatements to building developers that can lower condominium units’ property taxes for a set number of years. Their goal is usually to incentivize development in certain neighborhoods or on underutilized land. In turn, units become more enticing to buyers who will have to pay zero or reduced taxes on top of their mortgage and maintenance fees.

There are currently two main types of tax abatements for condo buildings:

421-a
421-a has been the most common and widely used tax abatement in recent years for new residential buildings. The state-run program was started in 1971, providing a tax abatement to developers that carries over to individual unit owners. The abatement is for a set number of years (usually between 10 and 30, depending on the borough, as Manhattan typically falls on the shorter side) and begins diminishing year-by-year at a certain point within that time frame.

The 421-a program expired in 2016, but then-Governor Cuomo reinstated it the following year as part of his larger affordable housing plan. Under this version, developers taking advantage of 421-a had to set aside a certain percentage of units (between 25% and 30%) as affordable.

421-a is now set to expire again in June 2022, so any project hoping to qualify must commence construction before June 15, 2022, and be completed on or before June 15, 2026. Governor Hochul has already released a proposed replacement called Affordable Neighborhoods for New Yorkers (ANNY), or 485-w, which would once again provide tax abatements to condo developers. It includes more deeply affordable housing requirements, and it goes further to incentive condo developers, extending the abatement for up to 40 years. It still requires legislative approval.

J-51
J-51 is a tax abatement and exemption that applies to developers renovating existing residential buildings or converting commercial buildings to residential use. The abatement depends on the type of renovation and where the building is located. It lasts for 14 or 34 years (with the latter applying to affordable projects) and exempts developers and owners from the increased taxes that they would normally incur from completing the renovation work. It also provides an abatement towards the cost of work that can range from 50 to 150 percent. This program, too, is expected to lapse in June 2022.

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Other Abatements

There are also several abatements that building owners or individual apartment owners can apply for.

The Cooperative and Condominium Property Tax Abatement applies to co-op and condo owners who use their unit as their primary residence and meet a variety of qualifications. They cannot be taking advantage of any other abatements.

The Green Roof Abatement is a one-time property abatement for properties that install a green roof.

The Solar Roof Abatement is a four-year property abatement for properties that install solar panels.

The Major Capital Improvement (MCI) Abatement is applied for one tax year when owners of rent-regulated class 2 properties make major capital improvements to the building.

Tax Abatements vs. Tax Exemptions

A common confusion is that tax abatements and tax exemptions are the same thing. As explained, tax abatements are tax reductions set by the city for specific locations or types of construction and can be taken advantage of by anyone who qualifies. They lower taxes directly for a set amount of time. Exemptions are granted to individual property owners on a case-by-case basis and reduce taxes indirectly by lowering the taxable value, which is used to calculate property taxes. A common tax exemption today is the STAR Program.

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This article is not an official New York City resource. For all questions regarding property taxes, call 311 or visit the Department of Finance’s Help Page.

Learn more about NYC property taxes here:

NYC property taxes: All you need to know

The STAR Program explained

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