If you’ve been browsing listings in Philadelphia, you may have come across the term “tax abatement.” But what exactly does that mean — and why is it such a big deal when buying a home in the city?
Let’s break it down.
What Is a Tax Abatement?
A tax abatement is a temporary reduction or elimination of property taxes on new or improved real estate. In Philadelphia, the city offers a popular tax abatement program to encourage new construction and major renovations — and it can save homeowners thousands of dollars over time.
How Tax Abatements Work in Philly
Philadelphia’s tax abatement program gives property owners a 10-year break on certain parts of their property taxes. The rules vary slightly depending on whether you’re building new or renovating an existing property.
?️ For New Construction:
- You pay property taxes on the value of the land only.
- You don’t pay taxes on the structure (the building itself) for 10 years.
? For Renovations or Improvements:
- You continue to pay taxes on the original value of the property.
- You don’t pay taxes on the value of the improvements (like an addition, a full gut renovation, or major upgrades) for 10 years.
After the 10 years are up, the full assessed value of the property is taxed.
Why It Matters for Buyers
A tax abatement can dramatically reduce your monthly costs, especially in the early years of owning your home.
Let’s say you buy a new construction home in Philly with a 10-year abatement. Your property taxes might be as low as $500–$1,000/year, compared to $7,000–$10,000/year without the abatement. That can free up money for renovations, savings, or just make the mortgage more affordable.
It’s one of the reasons why new construction homes in Philly are so popular — the savings are real.
Do All Properties in Philly Have a Tax Abatement?
Not all. Only qualifying new builds or significantly renovated properties that applied for the program during construction or renovation are eligible. The program has also changed over time, so:
- Some older abatements are more generous (pre-2022).
- Newer abatements may phase in some of the value over the 10 years.
- Developers typically highlight whether a home has a current abatement — always double-check!
Can You Transfer a Tax Abatement?
Yes! If you buy a home that already has a tax abatement in place, you inherit the remaining years. For example, if you’re buying a property in year 3 of its 10-year abatement, you’ll benefit from 7 more years of reduced taxes.
Key Takeaways
✅ Tax abatements reduce your property taxes for 10 years
✅ Available on new construction and major renovations
✅ Savings can make a big difference in monthly costs
✅ Not all homes have them — always ask your agent!
Philly’s tax abatement program is one of the most buyer-friendly incentives in the city. If you’re looking to save on property taxes while building equity, an abated home can be a smart move — especially for first-time buyers or those buying new construction.
Have questions about finding homes with tax abatements? Let’s talk! Email me at [email protected].