Pennsylvania’s LERTA tax abatement lets owners of commercial, industrial, and other qualifying properties skip paying property taxes on the increased assessed value that comes from new construction or renovations, for up to ten years, when the property sits inside a locally designated deteriorated area. The exemption covers only the added value from your improvements, never the land or the pre-existing building. And it only applies to the share of your tax bill from taxing bodies that have adopted the program, so real savings depend on which of your county, municipality, and school district are participating.
Who and What Qualifies
The statute reaches industrial, commercial, and other business properties located in a deteriorated area designated by the local governing body.1Pennsylvania General Assembly. Pennsylvania Code Title 72 PS 4725 – Deteriorated Areas It also reaches properties a government agency has ordered vacated, condemned, or demolished for code violations. Most municipalities limit their programs to commercial and industrial properties, but some have expanded eligibility to residential properties. The City of Arnold in Westmoreland County is one example.2Westmoreland County. LERTA Opportunities
The work itself must be substantial enough to count as an improvement under the statute: construction, reconstruction, or renovation that raises the assessed value, changes how the property is used, or improves its safety. Routine maintenance and minor cosmetic repairs that don’t move the assessment won’t qualify.
Confirm Your Property Is in a Designated Area
Before any exemption can be granted, the municipal governing body has to formally establish the boundaries of its deteriorated area through a public hearing process.1Pennsylvania General Assembly. Pennsylvania Code Title 72 PS 4725 – Deteriorated Areas Some municipalities draw the zone narrowly around a specific industrial corridor. Others cover mixed-use neighborhoods. And some don’t participate at all. Two neighboring boroughs can have very different maps, so your first call is to the municipal office to confirm your parcel sits inside a designated area.
Three Taxing Bodies, Three Separate Decisions
This is where LERTA trips up the most people. Pennsylvania property taxes come from three separate authorities: the county, the municipality, and the school district. Each one has to independently adopt LERTA by ordinance or resolution for its share of your tax bill to be exempt.1Pennsylvania General Assembly. Pennsylvania Code Title 72 PS 4725 – Deteriorated Areas If the county and municipality have adopted the program but the school district hasn’t, you’ll get an abatement on the county and municipal portions only. The school district’s share, often the largest piece of the bill, stays fully taxable from day one.
Each adopting body can also set its own schedule. The county might offer a graduated ten-year abatement while the municipality offers five years at a flat rate. Check with all three before you commit to a project, so you know the combined benefit you’ll actually see.
How Much Is Exempt and for How Long
The maximum exemption period is ten years, and local taxing authorities can choose any shorter duration.3Pennsylvania General Assembly. Pennsylvania Code Title 72 PS 4726 – Exemption Schedule The adopting ordinance spells out how much of the improvement value is exempt each year. Two common structures show up:
- A graduated schedule that starts at 100% in year one and drops ten points a year down to 10% in year ten, easing you into the full tax load.
- A flat-rate schedule that exempts a constant percentage for a shorter fixed term, such as five years at 100%, with a sharper transition once the term ends.
The schedule in effect when you first apply locks in for your project. If the municipality later amends its ordinance to shorten or reduce the schedule, the change doesn’t apply retroactively.4Pennsylvania General Assembly. Pennsylvania Code Title 72 PS 4727 – Exemption Requests and Assessment
The exempt figure is the difference between your property’s assessed value before the project and its assessed value after completion. There’s a ceiling many applicants miss: the exemption cannot exceed the additional assessment tied to the actual cost of your construction or improvements. If your renovation costs $500,000 and the assessor determines the market value rose by $700,000, the exempt amount is capped at the portion attributable to $500,000 in costs. On top of that, the municipal governing body can set a maximum cost per unit that applies uniformly to all eligible properties. Without such a maximum, the exemption covers the full actual cost of improvements.3Pennsylvania General Assembly. Pennsylvania Code Title 72 PS 4726 – Exemption Schedule
How to Apply
You have to submit a written exemption request to each participating taxing authority at the time you secure your building permit.4Pennsylvania General Assembly. Pennsylvania Code Title 72 PS 4727 – Exemption Requests and Assessment If no permit is required, you submit when construction starts. A copy also goes to the county board of assessment and revision of taxes (or its equivalent).
Most local ordinances give you a short window after permit issuance rather than requiring same-day filing. The window varies. Some municipalities allow 30 days; Berks County’s program allows 60.5County of Berks. Local Economic Revitalization Tax Assistance Act Program Application Check your local ordinance for the exact deadline, because missing it usually means automatic disqualification regardless of the project’s merit.
Do not start construction before your building permit is approved. Multiple jurisdictions treat pre-permit construction as grounds for denying the application entirely, and some ordinances make forfeiture explicit, including the loss of an exemption already granted.6eCode360. Township of Pocono Article VII LERTA
What Goes in the Application
Each municipality uses its own form, but you’ll generally provide:
- The parcel identification number from county records.5County of Berks. Local Economic Revitalization Tax Assistance Act Program Application
- The building permit date, showing municipal approval before construction began.
- Detailed cost estimates from contractor bids or signed contracts. Some programs set a minimum threshold. Bellefonte Borough, for instance, requires improvement costs of at least $75,000.7Bellefonte Borough. LERTA Application with Ordinance Attached
- Your current assessment, taken from the most recent tax bill or assessment notice.
- Legal names of all owners, including any business entities.
- A project description covering the physical changes and the intended use of the space after completion.
If the project has phases, lay out the timeline for each. The figures you submit form the factual basis for your exempt amount, so discrepancies between the application and the actual construction costs can create problems during assessment review.
What Happens After Construction
Once improvements are finished, the assessment agency separately assesses the new work and calculates how much of the new value qualifies for the exemption under the limits set by each participating taxing body.4Pennsylvania General Assembly. Pennsylvania Code Title 72 PS 4727 – Exemption Requests and Assessment The agency then notifies you and each taxing authority of the reassessment and the exempt amount.
Read the assessment change notice carefully. It should break out the total new assessment and the portion subject to the LERTA exemption. The abatement takes effect in the next tax billing cycle after the notice is issued, and the schedule you locked in with your original application starts running from that point.
The statute preserves the right of both the property owner and the local taxing authorities to appeal the reassessment and the calculated exempt amounts.4Pennsylvania General Assembly. Pennsylvania Code Title 72 PS 4727 – Exemption Requests and Assessment An overvaluation inflates your taxes once the exemption period ends. An undervaluation shrinks the exempt amount during the abatement years. Either is a reason to appeal to the county Board of Assessment Appeals within the window stated on your notice. Comparable sales data, actual construction invoices, and an independent appraisal of the improvements make the strongest cases.
If You Sell During the Exemption
The exemption attaches to the property, not the applicant. Sell or transfer the building during the abatement period and the remaining years pass to the new owner automatically, with no reset of the schedule.3Pennsylvania General Assembly. Pennsylvania Code Title 72 PS 4726 – Exemption Schedule That transferability can be a real selling point on an improved property, since buyers inherit a known tax advantage.
Local ordinances can add conditions that revoke the exemption. Some municipalities require the property to stay in compliance with building codes and zoning throughout the exemption period, and noncompliance or failure to obtain required permits can trigger forfeiture.6eCode360. Township of Pocono Article VII LERTA