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Tax Abated VS. Non-Tax Abated Buildings in Jersey City

June 25, 2019

Tax abated buildings – are they a positive for buyers of Jersey City real estate. 

While it may take a little bit of time to know whether they will be a plus or a minus for buyers I will attempt to at least demystify the discussion around why this is a tough question to answer at this time. 

During the real estate market boom of 2005-2006 developers in Jersey City were given tax abatements to incentivize development. Most of those abatements were in the range of 1.6 – 1.7% annually based on purchase price. At that time the tax rate in Jersey City was significantly higher, as high as almost 2.2% at one point.  There were abatements with sometimes significantly lower percentage rates if they were in what the seemed considered slightly more redevelopment areas, for example, or other determining factors that the city took into account. 

For quite a few years these abatements were considered strictly a positive factor, that was until the tax revaluation occurred. To clarify, Jersey City had not had a city-wide tax revaluation since 1988. The city was not able to reassess the existing properties unless renovations were done, permits were pulled for those renovations and the Certificate of Occupancy was granted when those permits were closed out. Closing out the permits was the triggering factor that allowed the tax inspector to reassess these homes. Consequently, many properties were never reassessed and were still being taxed at values far below their market value. The only way that the city can reassess these homes is with a city-wide revaluation. 

The revaluation resulted in increased revenue coming for the city. Every year the city establishes their budget and decides what taxes they need based on that. The increased revenue allowed the tax rate to be lowered.  So for the first time since the abatements were established, many of those abatements are higher than the actual city tax rate this year which is 1.48%, making the abatement more of a liability. However, keep in mind that the tax rate changes every year based on the city budget. A homeowner may individually opt out of their abatement, but if they chose to do this they cannot go back into the abatement. What many homeowners and buyers of tax-abated properties are electing to do is to wait another year or two to see where the trend is in the rate and then make that decision. 

There are many other variables that go into determining what is the better course of action for a homeowner, including whether the property will be based on purchase price, as with a tax abated bldg., or assessed value. This is merely meant to be an overview of the subject and we don’t make any specific representation about Jersey City taxes. 

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