The Commercial Rent Tax in New York City (NYC) is a 6-percentage-point tax levied on rent paid by tenants who occupy or use a property in Manhattan south of a hypothetical center line running down 96th Street for commercial purposes. The tax does not apply to commercial tenants on the city’s outskirts. When a tenant pays an annual rent of $250,000 or more, the Commercial Rent Tax is triggered. Tenants, on the other hand, are required to file a commercial rent tax return if their annual rent exceeds $200,000. These amounts are considered before any deductions that the taxpayer may be eligible for.
The definition of “rent” for the purposes of the CRT is quite broad. It is, in essence, the amount paid or required to be paid for the use or occupancy of a space; it includes any payment made by a tenant that is usually payable by the landlord. Thus, payments for the real estate tax, water charges, and insurance by a tenant are included in rent, but payments for improving, repairing, or maintaining the tenant’s leased premises are not.
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The CRT is levied specifically on a tenant’s “base rent.” The amount of rent paid by the tenant to the landlord, less certain specified deductions or exclusions, is referred to as base rent. A tenant’s rent is reduced by the amount of rent received or owed to them by a subtenant in order to arrive at the base rent figure. This reduction is available even if the subtenant’s rent is less than the CRT’s $250,000 tax threshold. Furthermore, after taking into account any available reductions for rent paid by subtenants, a further reduction of 35% of the remaining rent is permitted in calculating base rent. The 35% reduction is available to all tenants subject to the CRT, regardless of whether they are eligible for subtenant deductions.
Commercial Rent Tax in New York City (NYC)
Many taxpayers may be unaware of the New York City Commercial Rent Tax (“CRT”), but commercial tenants in Manhattan should be aware of its existence and potential impact on their businesses.
The New York City Department of Finance has recently been aggressively pursuing taxpayers who are in violation of the Commercial Rent Tax. This makes it even more important for commercial tenants to review the relevant laws as well as their lease agreements; to determine whether they are subject to and in compliance with CRT, or risk facing unexpected penalties.
Who Is Subject to the Commercial Rent Tax and How Much is it?
The tax is levied on commercial tenants in Manhattan south of 96th Street who pay an annual rent of $250,000 or more. However, if a tenant’s annual gross rent exceeds $200,000, they must still file a tax return. The CRT does not apply to rent paid for any premises north of the centerline of 96th Street in Manhattan, nor to any premises in any of New York City’s other four boroughs.
Affected tenants’ rent is subject to the CRT at a maximum effective rate of 3.9 percent. If the rent is less than $300,000 or the tenant’s total income is less than $10 million, the actual amount of tax may be less than 3.9 percent of the total rent paid.
Non-profit organizations, theatrical productions, and tenants leasing property in the World Trade Center Area or a Commercial Revitalization Abatement Zone are exempt from the tax.
“Base Rent” Is Taxable
The CRT is levied on the “base rent” of a tenant. “Base rent” is defined as the rent paid by a tenant to the landlord for each taxable premises for a period, less any amounts received or due to the tenant for the same period from any subtenant of any part of the premises. This is true even if the subtenant pays less than $250,000 in rent to the tenant.
For the purposes of the Commercial Rent Tax; the term “rent” is broad and includes expenses that a taxpayer might not consider rent. Rent includes any payment made by a tenant that is normally paid by a landlord; such as real estate taxes, utilities, water charges, sewer charges, and insurance.
Are Tenant Improvements Excluded?
Expenses paid by the tenant for the improvement, repair, or maintenance of the tenant’s premises are generally not included in rent and are thus not subject to CRT. Many taxpayers automatically assume that expenses related to tenant improvements are not subject to CRT because of this statutory exclusion.
However, if a lease specifies a dollar amount for a work allowance that the landlord is required to provide; then the tenant’s payment of this obligation on behalf of the landlord in lieu of fixed rental payments is subject to the Commercial Rent Tax. If a lease does not require the landlord to provide a specific work allowance; the tenant’s leasehold improvement expenses are not subject to CRT. As a result, tenants must carefully review and analyze the terms of their lease agreement to determine whether expenses for tenant improvements are subject to CRT.
Taxable Premises
Commercial Rent Tax is levied not only on office space, but also on any other “taxable premises” such as a warehouse, shop, garage, or parking lot. Unless the taxpayer can demonstrate otherwise, all premises are presumed to be taxable. For the purposes of the CRT, “taxable premises” are defined as premises used or intended to be used to carry on any trade, business, professional, vocational, or commercial activity, including premises used solely to rent to subtenants.
Steps to Take If You Aren’t Compliant
Taxpayers who are not in compliance with the CRT should consider participating in the Department’s Voluntary Disclosure Program (“VDP”) because the statute of limitations never runs out for years for which a tax return has not been filed. In general, a taxpayer may participate in a VDP if the department has not already contacted them; about their obligation to file a CRT and has not been notified of a CRT audit. By entering into a VDP, a taxpayer can benefit from the waiver of penalties, which can be substantial; as well as reduce their CRT liability to a limited lookback period rather than pay CRT for all years.
Commercial Rent Tax NYC
This tax is levied on tenants who occupy or use commercial property in Manhattan south of 96th Street. If you rent space in this area for any trade, business, profession, or commercial activity, you are subject to the Commercial Rent Tax NYC, and you must also:
- It is located in the Manhattan borough, south of the 96th Street centerline;
- The annualized gross rent paid is at least $250,000; and other exemption criteria, such as short rental periods, residential subtenants, use for theatrical productions, and non-profit status, do not apply to you.
Tenants with annual taxable rents of $250,000 to $300,000 are eligible for a sliding-scale credit that offsets the tax partially.
Filing Information
Electronic filing is available at www.nyc.gov/eservices. If you’re filing on paper, go to the Commercial Rent Tax (CRT) Returns forms page to get the most up-to-date tax forms, as well as spreadsheets for additional premises and subtenants.
Reports and Forms
Deadlines for Filing
Every year on June 20th, annual returns are due. Each year, quarterly returns are due on September 20, December 20, and March 20. Unless both of the following conditions are met, every tenant must file an annual return on or before June 20 covering the previous year, from June 1 to May 31, unless both of the following conditions are met:
- The annual gross rent paid for any taxable premises is $200,000 or less (before deductions and reductions); and
- Any subtenant of the premises pays a rent of $200,000 or less.
Every tenant who is subject to tax for a period of time is also required to file a quarterly return. If a tenant ceases to do business, the tax is due immediately, and a final return for the entire year (Form CR-A) must be filed within 20 days of the tenant’s termination.
Legal Standing
Chapter 7 of Title 11 of the Administrative Code
Enabling Act: Laws of 1963, Chapter 257.
Commercial Rent Tax Return
Annual Return CR-A
If you have three or fewer premises/subtenants, use the form below; otherwise, make copies of page 2 to report additional premises/subtenants. If you want to report more than three premises/subtenants and use a spreadsheet, fill out page 1 of the CR-A form and use the Finance Supplemental Excel Spreadsheet below.
- CR-A 2020-21 Commercial Rent Tax Annual Return
(applicable for the tax period June 1, 2020, to May 31, 2021 only)
Download Instructions
File online with e-Services
Finance Supplemental Excel Spreadsheet (Annual Reporting)
(to report more than 3 (three) premises or multiple subtenants)
Note: If reporting multiple subtenants for any one premises, attach a separate Excel spreadsheet with the following information: premises number, subtenant name, EIN or SSN, and rental income amount. Aggregate the rental income and enter it on the applicable row 21. Add this multiple-subtenant attachment to your paper filings.
Commercial Rent Tax Due Dates: 2023
Every year on June 20th, commercial rent tax annual returns are due. Each year, quarterly returns are due on September 20, December 20, and March 20.
Quarterly Returns CR-Q
- CR-Q3 2023-24 Commercial Rent Tax 3rd Quarter Return
(applicable for the tax period from December 1, 2023, to February 28, 2024, only).
- CR-Q2 2023-24 Commercial Rent Tax 2nd Quarter Return
(applicable for the tax period September 1, 2023, to November 30, 2023, only)
- CR-Q1 2023-24 Commercial Rent Tax 1st Quarter Return
(applicable for the tax period from June 1, 2023, to August 31, 2023, only).
- CR-A 2023-24 Commercial Rent Tax Annual Return
(applicable for the tax period from June 1, 2023, to May 31, 2024, only).
Conclusion
The Commercial Rent Tax only applies when rent is paid or when a landlord provides a rent credit in lieu of a debt owed to the tenant. Negotiated Free Rent is exempt from the CRT. Taxpayers who have been assessed Commercial Rent Tax on Free Rent should think about contesting their audit assessments.
Frequently Asked Questions
Who is subject to NYC commercial rent tax?
About. This tax is levied on tenants who pay at least $250,000 in rent per year and occupy or use commercial property in Manhattan south of the 96th Street centerline.
How the commercial rent is taxed in India?
From the fiscal year 20-21 onwards, the payer of rent must deduct 10% income tax at the source of the rent for the property that exceeds Rs. 2.40 lakh per year. TDS applies to both residential and commercial properties. TDS will be exempt from GST.
Is commercial rent tax deductible?
Obtaining a commercial lease
You can claim your rent as a tax deduction if you leased commercial property to run your business.
When did NYC commercial rent tax start?
1963
By doing so, you have not only accepted the lease’s duties and obligations as a tenant, but you have also entered the world of the New York City (NYC) Commercial Rent Tax (CRT). CRT is a mysterious tax that was first implemented in 1963 in order to increase the city of New York’s tax revenue.
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