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Partial Property Tax Abatement Phases Out for Some Condo and Co-op Owners

State & Local Tax Alert
March 19, 2013

As many New York City condominium and co-op owners are finding out, if your NYC condo or co-op isn’t your primary residence, your partial property tax abatement is now being phased out. The New York State Legislature recently passed a bill to continue the partial property tax abatement for some NYC condo and co-op owners. The renewed property tax abatement comes with additional red tape, however, which could be costly to some condo and co-op owners in the short run, but potentially beneficial in the long run.

To many condo and co-op owners, the biggest change to the property tax abatement involves the owner’s primary residence. Condo and co-op owners who have indicated a different primary residence on New York State income tax returns (or by other means) will receive a notice from the NYC Department of Finance indicating their condo or co-op’s property tax abatement will be phased out completely by the 2014 tax year, which begins July 1, 2014. If a condo or co-op owner receives the notice in error, the owner can complete a verification statement attached to the notice indicating the condo or co-op is in fact the owner’s primary residence.

While losing the benefit of the partial property tax abatement will sting for many NYC condo and co-op owners who don’t consider the apartment to be their primary residence, there is a faint silver lining in the new abatement program. In NYC residency audits where domicile is at issue, auditors and taxpayers will cite a property tax exemption available only on a primary residence (such as the STAR exemption in New York and the Florida Homestead exemption) as a non-primary factor to determine a taxpayer’s true domicile. If a taxpayer receives a notice that a property tax abatement is going away because the NYC Department of Finance has determined a condo or co-op is not the taxpayer’s primary residence, the taxpayer should keep the notice. While it won’t swing the domicile issue, the notice could come in handy as a bit of extra support to prove a non-NYC domicile.

Also, of course, don’t get greedy. A taxpayer who protests this change by claiming the NYC property is the primary residence on the verification statement better be sure such a claim won’t be regretted later. Such a claim could undermine a contrary position taken in a residency audit.

The NYC Department of Finance has outlined additional details for the renewed property tax abatement program, available here. Please contact us if you have any further questions or would like to discuss the NYC notice.