Tax abatements can reduce the amount of money you owe the state or local governments in taxes. These discounts are most frequently associated with property taxes to entice individuals to purchase homes or other properties in particular areas or developments. Businesses and individual property owners alike can profit from property tax abatements, albeit usually, some requirements must be fulfilled in order to be eligible.
What is Tax Abatement
A tax abatement is a possible reduction in your tax liability. Usually, they have to do with property taxes. Tax abatements are a tool cities and other municipalities use to entice businesses, landlords, and purchasers of single-family homes to the area.
What Distinguishes A Property Tax Exemption From A Property Tax Abatement?
What you could owe in property taxes is reduced to zero by a property tax exemption. Due to unique circumstances or programs, companies or individuals may occasionally be eligible for a property tax exemption. Nonetheless, these initiatives might only last a few months or a year, but property tax abatements frequently persist for decades. It is possible to combine discounts with exemptions, meaning that once your exemption expires, you could use an abatement program to reduce the amount of property taxes you owe.
How Is An Abatement Carried Out?
Abatements of property taxes are reductions in the amount of property taxes that would otherwise be due. They function rather similarly to the discount you might receive when shopping in a retail store, although they’re offered by local or state governments and can last for different periods of time.
In the first scenario, tax abatement may be negotiated with a firm by cities or other municipalities to entice it to construct a facility or buy land nearby. In the second scenario, any buyer or property owner who meets the requirements may be able to apply for the abatement program; however, you would need to first determine your eligibility.
Certain states, counties, or cities may provide comprehensive property tax abatement programs that automatically apply the abatement to all qualifying properties. For instance, a law implemented by the Commonwealth of Virginia in 19981 offers eligible trucks and cars a yearly percentage reduction in vehicle property taxes.
In this instance, the tax abatement is applied automatically when counties mail out property tax invoices for vehicles each year.
Abatements from property taxes may be offered at a fixed rate for a predetermined period of time, like 50% for ten years. Additionally, they have the option to be adjusted, which is typically used to phase in full property tax. For instance, a city may provide a ten-year property tax package that is phased in. In this case, you may pay 10% of the standard property tax in the first year, 20% in the second, and so on until you pay the entire 100%.
