What is New York City’s Commercial Rent Tax?
The Commercial Rent Tax (CRT) is a tax imposed on businesses that rent commercial property in certain areas of New York City. The tax is only imposed on businesses that rent property below 96th street in Manhattan. The tax is based on a percentage of the business’s annual rent paid for the property, and it is typically the responsibility of the tenant to pay the tax. Depending on the amount remitted, the CRT returns are filed on an annual or quarterly basis.
The current tax rate is 6% of the base rent. All taxpayers are given a 35% base rent reduction, which ends up lowering the tax rate to 3.9%. Businesses with rent of less than $250,000 are not subject to tax. New York City provides a tax credit if your annualized base rent before the rent reduction is between $250,000 and $300,000.
Small business owners may be eligible for credit against the CRT. The credit is based on the amount of rent paid, and the income and expenses of the business. To be eligible for the credit, a business must have both less than $5 million in gross income and pay less than $500,000 in rent before the 35% rent reduction.
Commercial Rent Tax Complexities
As mentioned above, the New York City commercial rent tax is imposed on the base rent. The definition of base rent is one of the complexities that companies should be aware of when determining their CRT liability. Base rent also includes any additional charges for services such as electricity, heat, and cleaning. Other charges like Common Area Maintenance (CAM), taxes, and insurance are not included in the base rent. An example of nuance is that the inclusion of electricity in the base rent calculation is dependent on whether the electricity is separately metered or provided by the landlord through submetering. Separately metered utility services are excluded from base rent. This is why it is helpful to consult with a tax professional as it ensures CRT liabilities are not over or understated.
PMBA can guide you through the entire commercial rent tax return filing process. PMBA has assisted many clients calculate and file these returns. If you have any questions or would like to get more information, do not hesitate to contact a PMBA professional to help assist you in getting started with your commercial rent tax filings.