Philadelphia Tax Abatement: What Buyers Need to Know

A Philadelphia tax abatement exempts some or all of a home’s improvement value, meaning the building, from Real Estate Tax for a set number of years, while the land is still taxed. It stays with the property when it sells, so a buyer inherits whatever years are left. Newer abatements shrink 10% a year over a decade; older ones stay at 100% for ten years and then end all at once.

That last sentence is where buyers get hurt. Two houses on the same block can carry wildly different tax bills five years from now, and the listing won’t tell you which is which.

What Is a Property Tax Abatement in Philadelphia?

An abatement is the city agreeing not to tax new or improved construction for a while. The Office of Property Assessment (OPA) runs it. The point was to get people building and fixing up houses. Walk through Fishtown or Graduate Hospital and count the newer rowhomes.

There’s more than one kind, though. The ones buyers bump into most:

• New residential construction (Ordinance 1456-A): the ten-year abatement most people mean when they say “the abatement.”
• Residential rehab (Ordinance 961): a ten-year abatement on improvements to an existing home.
• Development abatement (State Act 175): a short 30-month break during construction or conversion.

Old Abatement or New Abatement: Which One Does the House Have?

December 31, 2021 is the line. For new residential construction, abatement applications filed on or before that date got the original deal: 100% of the improvement value exempt for ten straight years. Applications filed after it fall under a declining schedule. Developers knew it was coming, too. Axios reported the city issued 900 new construction permits in December 2021 alone, against roughly 150 in a typical month. So plenty of homes finished after 2022 still carry the old, full version.

How the declining schedule works

Year one, the building is 100% exempt. Year two, 90%. It keeps stepping down 10 points a year until year ten, when only 10% is exempt. Here’s what that looks like for every $100,000 of building value at today’s 1.3998% rate:

• Year 2: about $140 in tax
• Year 5: about $560
• Year 10: about $1,260
• Year 11 and beyond: about $1,400

Annoying, but predictable.

The cliff on older abatements

Full abatements don’t step down. The bill stays low for a decade and then the whole building value lands on the tax bill in one shot. If you’re buying in year eight or nine of an old-style abatement, you’re really budgeting for year eleven.

Rehab abatements, for what it’s worth, weren’t touched by the 2022 change.

When Does the Abatement Clock Start?

For new construction under the current program, OPA’s application says it starts the first month after the title date or the first month after the certificate of occupancy is issued, whichever comes later. Once those dates are set, they don’t move.

And the developer files the application, not you. So in a building that sells out slowly, two condos down the hall from each other could be on different clocks. Don’t lean on the developer’s brochure or a neighbor’s bill. Check the specific unit. If high-rise living is on your list, add this to your homework along with condo fees.

Why Isn’t the Tax Bill Zero?

Because the land is still taxed. The abatement covers the improvement, so you’ll get a bill on the lot’s value even in year one. Most people know that going in. What surprises them is that the land gets reassessed like everything else, and OPA mailed 2027 valuation notices this summer. The rate is staying at 1.3998% for 2027, but a higher land value still nudges the bill up.

What Happens When the Abatement Ends?

The building’s full assessed value becomes taxable. If your lender escrows taxes, your monthly payment jumps once the escrow account catches up.

One upside. Homes with an active ten-year residential abatement can’t get the Homestead Exemption, but once it’s over, an owner-occupant can apply. The city says that’s worth up to $1,399 a year right now. Owners have to file for it. Nobody does it for you.

How to check a home’s abatement

Search the address on the city’s property search. OPA shows any approved abatement as an exempt value on the Abatement/Exemptions line. The city’s abatement program page lays out each type if you want the details.

Budget like it’s already gone

Honest advice? Qualify for the house at the fully taxed number, then enjoy the abatement as a bonus. Plug the post-abatement tax into our mortgage calculator and see if you still like the payment. If you don’t, that tells you something.

Is a Home With an Abatement Still a Good Buy?

Often, yes. Newer systems, fewer surprises, and real savings in the early years. Just don’t let the low tax figure on the listing do your thinking. A buyer comparing an older home with no abatement to a newer one with three years left is comparing a known cost to a moving one. We’d rather you see that before settlement. Our roundup of new construction around Philadelphia and our buyer resources are good next stops, and you can browse Northern Liberties or Brewerytown listings while you’re at it.

Philadelphia Tax Abatement FAQ