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Beyond The Numbers - April 2018

 

NYC Co-op and Condo Real Estate Tax Abatements

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New York City allows a real estate tax abatement for owners of cooperative units and condominiums. This abatement, however, is not available to individuals who purchase the apartments through a limited liability company ("LLC").

If eligible, the abatement is based on the following average assessed values and requirements:

ASSESSED VALUE

% REDUCTION

$50,000 or less

28.1%

$50,000 - $55,000

25.2%

$55,001 - $60,000

22.5%

$60,001 and above

17.5%


Some of the requirements for abatement include:

  1. The co-op or condo unit must be the owner’s primary residence.
  2. The co-op or condo owners cannot own more than three residential units in any one development, and one of the units must be the owner’s primary residence.
  3. Units owned by an LLC are not eligible.

Individuals who acquire condominiums and cooperatives through a single member LLC ("SMLLC"), an LLC that has only one owner, for privacy or liability issues, also are not eligible for this tax abatement, which, for most high net worth individuals, represents a 17.5% reduction of total real estate tax.

The tax abatement is even more valuable for tax years 2018 and forward, as the individual deduction of real estate taxes will be limited to a combined $10,000 for income, sales, and property taxes. The new limitation became effective under the Tax Cuts and Jobs Act, which was signed into law by President Trump in December 2017.

Taxpayers should consider the advantages/disadvantages of setting up SMLLCs that hold co-ops or condo units used as personal residences. Your Marcum tax professional is available to discuss options, as well as, the possible termination of established SMLLCs in view of the reduced deductibility of real estate taxes.

 
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