ACT 42 and ACT 202 RESIDENTIAL PROPERTY TAX ABATEMENT
If you purchase or build new residential real estate, or make improvements to existing residential real estate, in the City of Pittsburgh, your property tax can be abated, or reduced, for up to three years following completion of the improvements. Moreover, if the residential property is located within a “Targeted Growth Zone” or other defined area, your City of Pittsburgh and Pittsburgh School District property taxes can be abated for up to ten years following completion of the improvements. This three-part blog is intended to provide an overview of the various residential real estate tax abatement programs available to property owners in the City of Pittsburgh and the steps necessary to obtain the benefit of such programs. Part 1 focuses on the Act 42 and Act 202 programs adopted by Allegheny County, the City of Pittsburgh and the Pittsburgh School District.
Pennsylvania’s New Home Construction Local Tax Abatement Act, 72 P.S. § 4754-1 et. seq., otherwise known as Act 202, authorizes local taxing authorities to exempt new residential construction from real estate taxation for specific periods of time when the construction is located on unimproved residential property. Similarly, the Improvement of Deteriorating Real Property or Areas Tax Exemption Act, 72 P.S. § 4711-101 et. seq., otherwise known as Act 42, authorizes local taxing authorities to exempt the assessed valuation of improvements of deteriorated properties from real estate taxation for specified amounts and periods of time when the property is located within a deteriorated neighborhood. Through various resolutions and ordinances, Allegheny County, the City of Pittsburgh and the Pittsburgh School District have determined that Wards No. 1 through 32 of the City of Pittsburgh constitute deteriorated neighborhoods within the purview of these Acts and, thus, have adopted variations of the abatement programs authorized by Act 42 and Act 202.
The Allegheny County Act 202 program allows for an abatement of up to 50% of the assessed valuation of real estate attributable to the actual cost of construction of new residential property (including individual residential units pursuant to a condominium plan) in Allegheny County. The abatement is for a period of two years commencing on the first year in which real property taxes are assessed and imposed on such residential units following construction, and it applies only to the value of the building (house/unit); home owners will still be taxed on the land value, if any, attributed by the County. Similarly, the Allegheny County Act 42 program allows for an abatement of the total value of improvements to existing residential real estate up to a maximum amount of $66,000 for County tax purposes. The abatement is for a period of two years commencing on the first year in which real property taxes are assessed and imposed following completion of the construction of the improvements, and, as with Act 202, applies only to the value of the improvements to the building/unit.
City and School District Taxes:
The Act 42 programs adopted by the City of Pittsburgh and Pittsburgh School District allow for an abatement of the total value of improvements and/or construction to residential property up to a maximum amount of $86,750 for new construction and $36,009 for renovated property for City and School District purposes. The abatement is for a period of three years commencing on the first year following completion of construction. The City and School District abatements are available in addition to the County abatement(s) described above, and abatements for all three taxing jurisdictions should be applied for simultaneously.
For each of the available tax abatements discussed herein, application for such abatement(s) must be filed with the appropriate local agency/office within 180 days of receipt of the initial building permit for making the improvements. The value of the improvements is determined by a professional real estate assessor acting on behalf of the County, City and/or School District upon completion of construction. Subject to the final determination by the taxing authorities, taxes on the subject property may be reduced by 100% of the value of the improvements, up to the maximum value permitted by each jurisdiction, for each year in which the abatement remains in place. In addition, there is no restriction on the subsequent transfer of the eligible property; i.e., any person who purchases property for which an application for abatement was made, or for which the abatement was approved, will have the rights and benefits of the application or approved abatement.
Successfully applying for and obtaining these abatements can save property owners hundreds or thousands of dollars in real estate taxes. However, the content and timing of filing of the applications for each abatement are crucial in order to avoid waiving your right to such benefits. Property owners considering building or renovating residential property should consider consulting with counsel for more information regarding the available tax abatements and/or for assistance with evaluating and filing abatement applications for individual projects.
Interested in learning more? Part 2 – Act 42 Enhanced Residential Abatement discusses the potential for even greater real estate tax savings through alternative programs available in the City of Pittsburgh and Pittsburgh School District.