Are you planning to invest in real estate in New York City? We guarantee that you’ll love the NYC 421-A tax abatement program, especially if you, like most people, are not a fan of taxes. So long as you are a property developer in NYC, you can easily get the NYC 421-A tax abatement, but your goal must be to offer affordable housing for the city’s residents. The program reduces your property tax bill for a specific duration. In most cases, it lasts for ten years, but yours could be 15 or 25 years, depending on the code it is registered with. For instance, codes 5117 and 5110 provide a ten-year term, while code 5114 comes with a 25-year period.
If you’d love to know more about the NYC 421-A Tax Abatement, read on!
We’ll start with the program’s history.
The History of the NYC 421-A Tax Abatement
The NYC 421-A Tax Abatement began in 1971. Its objective was to encourage NYC property developers to make the most out of underutilized land in New York City by investing in affordable residential buildings for families. The program prompted the construction of thousands of condos in Manhattan and other NYC boroughs. Today, the NYC 421-A tax abatement is still incredibly popular. The buildings benefitting from this tax abatement are twice as many as those with other property tax programs.
Home buyers will be delighted to know that the buildings they plan to purchase come with a 421-A tax abatement. Research all the essential information about this program because it has six codes, each offering a different property tax reduction percentage. Some people have often wondered if buying a building with an NYC 421-A tax abatement is an excellent idea. The answer to this is; it depends solely on the buyer’s preference.
What to Expect When Investing In a Property with a 421-A Tax Abatement?
A property with tax abatement is undoubtedly better than one without, but things could get a little complicated. For starters, expect most home sellers to sell apartments with a 421-A tax abatement at a higher cost upfront. They already know that you will spend a lot less on property taxes. While this might not be a problem for real estate investors with a high and flexible budget, those with low, tight budgets may not see it that way. You should always evaluate the home seller’s asking price for a property with tax abatement and the cost of one without. When that’s done, ask yourself the question; Is it really worth it?
When buying a house with tax abatement, you should also anticipate dealing with certain risks. A home seller could choose to sell their co-op or condo because the 421-A tax abatement period is close to expiring. If you purchase the property blindly, you might not enjoy the tax reduction benefits you hoped for.
After reading through this article and understanding the NYC 421-A tax abatement, you could take advantage of it as a real estate investor. The main advantage of purchasing a property with this tax abatement is that your property’s tax bill will be considerably reduced. Ensure that the apartment or condo you are buying is worth it. Before paying for the residential property, ensure that there are a good number of years left in the tax abatement.