Owning real estate in New York City isn’t just a badge of honor—it’s a complex financial undertaking that requires strategic thinking, especially regarding taxes. With 2025 in full swing, it’s the perfect time for NYC property owners to reassess their tax planning strategies. Whether you own a brownstone in Brooklyn, a Manhattan townhouse, or a rental property in Queens, these three smart tax moves can help you protect your investment, reduce your liabilities, and maximize your return.
1. Take Advantage of Property Tax Exemptions and Abatements
One of the most effective ways to reduce your tax burden in NYC is to tap into the variety of exemptions and abatements offered by the city and state. Yet, many property owners overlook these benefits simply because they don’t realize they qualify.
Key Programs to Consider:
- STAR (School Tax Relief) Program: Available for eligible homeowners, this program provides relief on school taxes for your primary residence.
- Senior Citizens Homeowners’ Exemption (SCHE): If you're 65 or older and meet certain income thresholds, you may qualify for a reduced assessed property value.
- Disabled Homeowners’ Exemption (DHE): This offers a property tax reduction for individuals with disabilities who meet specific income limits.
- Co-op and Condo Tax Abatement: If you own a qualifying unit and meet residency requirements, you can reduce your property taxes by up to 28%.
How to Maximize It:
Each exemption or abatement comes with its own requirements and filing deadlines. Working with a tax professional or real estate team familiar with the nuances of NYC’s tax code can ensure you don’t leave money on the table. Review your eligibility annually, as income and property use can affect your qualification status.
2. Leverage 1031 Exchanges for Investment Properties
If you're looking to sell a property and reinvest the proceeds, a 1031 exchange is a powerful tool to defer capital gains taxes. Under Section 1031 of the Internal Revenue Code, you can swap one investment property for another of like kind, deferring your tax bill and preserving more capital for future investments.
Why It Matters in NYC:
In a market like New York, where property values have historically appreciated significantly, a sale without strategic planning can lead to substantial capital gains taxes. A 1031 exchange allows you to:
- Reinvest in emerging neighborhoods with growth potential
- Upgrade to a larger or better-located property
- Diversify your portfolio within NYC or across other U.S. markets
What to Watch For in 2025:
There have been ongoing discussions in Washington about potential changes to the 1031 exchange rules, particularly capping deferrals or restricting usage. Stay informed and consult a qualified intermediary early in your transaction process to comply with strict IRS timelines and guidelines.
3. Deduct Renovation and Depreciation Strategically
Whether restoring a historic brownstone or modernizing a rental unit, it pays to understand how to leverage renovations and depreciation for tax savings.
Renovations and Capital Improvements:
While routine maintenance costs are deductible in the year incurred, major renovations are treated as capital improvements and must be depreciated over time. But this isn’t bad news—depreciation can provide substantial long-term tax benefits.
For example:
- Replacing the roof, adding a new HVAC system, or installing energy-efficient windows can be depreciated over 27.5 years for residential properties
- These costs can significantly offset rental income, reducing your overall tax burden
Bonus Depreciation & Section 179 in 2025:
As of 2025, bonus depreciation remains available at a 60% rate for qualifying improvements, a step down from 80% in 2023–24. Section 179, while more limited for real estate, can still be used for certain appliances, equipment, and other qualifying property assets.
Keep in mind:
- You must separate the land value from building value, as only the building portion is depreciable
- Consult a tax advisor for a cost segregation study to accelerate depreciation on certain components
Why Planning Ahead Pays Off
The NYC real estate market is dynamic and competitive. While buying and holding property is a proven wealth-building strategy, proactive tax planning sets successful owners apart. Understanding and leveraging the tax code is essential to long-term success in a city where even minor missteps can result in major costs.
As we move through 2025, NYC property owners face both opportunities and challenges—from changing tax laws to shifting market conditions. Now more than ever, having a knowledgeable team by your side makes all the difference.
Work With the Experts: Partner with The Kantha Team
When it comes to optimizing your real estate strategy—especially in New York City's intricate landscape—there’s no substitute for expert guidance.
The Kantha Team is New York City's premiere townhouse team, with a reputation for delivering results and protecting client interests at every step. Whether you're buying, selling, or managing a property, their deep knowledge of NYC's tax structures, legal intricacies, and market dynamics ensures you're always a step ahead.
Visit thekanthateam.com to schedule your consultation today and discover how smart tax moves can transform your property portfolio in 2025.
Make 2025 the year you take full control of your real estate future. Let The Kantha Team help you turn every tax season into a strategic advantage.
