A New Jersey federal bankruptcy judge on Thursday said she will approve a deal that allows bankrupt Revel Casino Hotel to pay far less in property taxes to Atlantic City this year.

The cash-strapped city agreed to lower its 2015 valuation of Revel, the city's newest casino property. Revel opened in 2012 to much fanfare but has never turned a profit, went bankrupt twice and closed last year.

Under the agreement, Revel's 2015 tax assessment is just $225 million, less than a tenth of the $2.4 billion it cost to build. Over the course of negotiations in bankruptcy court, the 2015 assessed value of the property dropped to $1.15 billion and then $625 million before the latest agreement was reached.

Read More$2.4B Revel Casino shuts down after just 2 year

At the current tax rate of 3.348 percent, Revel's next quarterly property tax payment will be about $1.9 million, down from the $9.8 million it would have been prior to the settlement. The city's 2015 tax rate has yet to be determined.

Judge Gloria Burns in Camden, New Jersey, said during a telephonic court hearing that she would approve the deal.

Property tax appeals by struggling casinos have dealt a huge blow to Atlantic City's finances. Their valuations have declined as gamblers have sought out new casinos opening in neighboring states, causing the city's property tax base to shrink in half in just five years.