New York City Co-op and Condo Tax Distribution Abatements and Exemptions

As Oliver Wendell Holmes, Jr., once said, taxes are the price we pay for civilization. While that may be true, its truth doesn't make a hefty tax bill any easier to swallow, especially when it comes to city and state property taxes. 

There is a complex array of abatements and exemptions for co-op and condo owners in both the federal IRS code and New York City tax code, often creating confusion and an uneasy sense of “did I miss anything” among co-op and condo residents. Add to that the fact that different boards may opt to distribute funds from these programs among their residents in different ways and the confusion can grow. 

Co-ops and condos are treated very differently for real estate tax purposes, says Mindy Eisenberg Stark, CPA, CFE, who has her own accounting firm MES, based in Scarsdale, New York. “A co-op pays the real estate taxes for the land and building which it owns and, through Section 216 of the Internal Revenue Code, passes that deduction on a pro rate share basis to the stockholders in the corporation,” she says. “In a condo, each unit is a separate tax lot and each unit owner pays their own real estate taxes.” 

The abatements in a condo “reduce directly the individual unit owner’s real estate taxes,” Stark says. “They are deducted from the bill and the unit owner pays the net tax.” 

In a co-op, “The corporation receives the reduction on its real estate tax bill and then has an obligation to credit each shareholder with their share of the reduction,” says Stark. “In November of each year, the corporation will receive a printout from New York City indicating how much of a reduction is owed to each unit depending upon the shareholder’s individual eligibility. The corporation will then decide how it will credit this back to the shareholders. Some co-ops will credit it in one lump sum and others over a period of months, as it will clearly affect the cash flow of the corporation.”

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2 Comments

  • After giving the coop abatement to those entitled shareholders, can the Board without prior discussion with shareholders impose an real estate tax assessment of$0.7005 per share to balance the budget?
  • Very informative, it always pays to enlist of qualified trusted advisers.