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How are co-op tax abatements calculated?

It's weird, but your neighbor's abatement may be different from your own.

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Question:

How does the city calculate co-op tax abatements? I notice that it is not simply distributed by share amount. Two units with the same number of shares can receive a different abatement. Why is that?

Answer:

The difference in abatements has to do with each shareholder's personal exemptions, according to our experts.

In co-ops, property taxes are paid based on the land and the building that the cooperative owns as a corporation, and deductions are then distributed to shareholders. Co-ops and condos both receive abatements because of a rather odd system of determining property taxes: The city assesses co-ops and condos as though they were rental properties generating a profit, and then distributes abatements, an ostensibly temporary correction until the property tax system is reformed. Under this system, the Department of Finance calculates abatement percentages based on the assessed value of the building.

So why, then, would shareholders who own identical units receive different abatements?

"Property tax abatements for each qualifying individual in a cooperative are calculated after any exemptions that are due to them," says Mary Ann Rothman, executive director of the Council of New York Cooperatives and Condominiums. "A shareholder who qualifies for benefits as a veteran or a senior, or by virtue of having a disability, has those tax differentials calculated first to reduce their share of property tax payable, then their remaining tax burden is reduced by the property tax abatement program."

This is why your neighbors may receive smaller or larger abatements than you do.

"Two shareholders may have the same shares. However, personal exemptions may account for different treatment of the shareholders where one shareholder may have the benefit of one or more personal exemptions, but the other may not," says Barry Margolis, a lawyer with the firm Abrams Garfinkel Margolis Bergson, LLP.

"Understanding each [tax benefit] requires an attorney who specializes in these types of abatements," says Deanna Kory, a broker with Corcoran. Such an attorney can tell you whether you're eligible for additional tax abatements, such as the school tax relief program STAR.


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