Property taxes are a consistent and often substantial cost for homeowners, and they don’t disappear once the mortgage is paid off. In the U.S., property taxes are a significant revenue source for state and local governments, accounting for over 30% of total state and local tax collections.

Many cities offer property tax abatement or real estate 澳洲幸运5官方开奖结果体彩网:tax abatement programs to alleviate this financial burden. These programs allow homeowners to reduce or eliminate property tax payments for a certain period, making homeownership more affordable. Property tax abatements can also enhance a property's appeal and 澳洲幸运5官方开奖结果体彩网:resale value while encouraging investment i♏n specific nei🅺ghborhoods.

Accessing Property Tax Abatement

Property tax abatement programs can provide substantial savings, sometimes eliminating or significantly reducing 澳洲幸运5官方开奖结果体彩网:property tax payments for years or even decadesꦗ. These programs are designed to attract homebuyers and developers to areas in need of revitalization. Some cities offer tax abatements citywide, while others focus on specific neighborhoods or types of projects.

Homebuyers can take ♎advantage of 🉐property tax abatement in several ways:

• Purchase a property with an existing abatement: Many cities offer properties already receiving tax abatements.
• Make improvements and apply for abatement: Buyers can purchase properties that qualify for abatement (based on specific improvement criteria), make the required changes, and apply for tax relief.

The first option is typically more straightforward, as the construction and𒁃 improvement phases have already been completed.

Examples of Abatement Programs

Cleveland, Ohio

Tax Abatement is available to homeowners and developers, and programs range from 85% to 100% for 15 years of tax abatement, depending on the project, as of 2024. Rehabilitation or new construction must occur within Cleveland and be completed under a valid and accurate permit issued by the City of Cleveland Department of Building and Housing.

St. Louis, Missouri

New construction on vacant land or a gut rehabilitation of an existing building is eligible for a property tax abatement lasting five to 10 years. During this period, the property tax rate is frozen at the property's value before the improvements.

Portland, Oregon

In Portland, the Homebuyer Opportunity Limited Tax Exemption (HOLTE) Program offers a 10-year property tax exemption on single-unit homes for structural improvements to t🍎he home as long as the property and owner remain eligible per program guidelines.

Property owners are still responsible for paying taxes on the assessed value of the land during the exemption period. Property owners only pay tax on the property's value before the rehabilitation or new construction. As of 2023, the property's sale price must be $455,000 or less.

Philadelphia, Pennsylvania

Philadelphia offers a 30-month abatement for new residential construction or improvements to existing, unoccupied residential homes. A 10-year abatement program is available for those who improve existing residential properties that contain one or more units or deteriorated industrial or commercial business properties.

Des Moines, Iowa

Property tax abatement percentages vary depending on the type of improvement and property location. New construction and rehabilitation projects are eligible for abatement for five years anywhere in the city on a declining schedule; properties in other specified locations qualify for a 10-year abatement on a declining schedule.

California

The Mills Act provides tax incentives for restoring and preserving qualified historic residences. Local governments negotiate these property tax abatements on a case-by-case basis with owners of qualified historic properties. Owಞners may achieve 40% to 60% per year property tax savings.

Property tax abatement programs may be offered to encourage the construction or redevelopment of buildings with affordable housing units.

Benefits of Property Tax Abatement Programs

While property tax abatement won’t eliminate your property tax bill, the savings can still be substantial. For example, if a homeowner typically spe🅠nds $3,100 annually on property taxes, a tax abatement that saves $175 per month (or $2,100 per year) could result in total savings of $21,000 over 10 years.

These savings can help homeowners afford larger or better properties, and they often stimulate economic development by encouraging property improvements and new construction. Moreover, these programs can support affordable housing initiatives by offering tax incentives to developers who include 澳洲幸运5官方开奖结果体彩网:affordable housing units in their projects.

Drawbacks of Property Tax Abatement Programs

While pro🌌perty tax abatements offer savings, there are potential drawbacks to consider:

1. Owner-Occupancy Requirement: In many cases, the property must remain 澳洲幸运5官方开奖结果体彩网:owner-occupant for the homeowner to continue benefiting from the abatement. If the property is sold to another owner-occupant, the abatement typically stays with the property, but the remaining years of the abatement period do not restart.
2. Neighborhood Concerns: Abatement programs often target areas in the revitalization process that may still need more amenities or infrastructure compared to more established neighborhoods. Buyers may face risks related to long-term revitalization success.
3. End of Abatement Period: Once the abatement period ends, property taxes may increase significantly, resulting in a sharp rise in annual housing expenses. This could be a concern for homeowners who are not prepared for the increase in taxes once the program expires.
4. Delinquency Risks: Some municipalities reserve the right to revoke tax abatements if the homeowner becomes 澳洲幸运5官方开奖结果体彩网:delinquent in property tax payments, even if the abatement is still in effect.
   

Abatement vs. Tax Exemption

Property tax abatement involv🗹es temporarily reducing or deferring property taxes for a specified period or a particular area. In contrast, tax exemption permanently exempts certain properties or purposes from paying property taxes altogether. Properties eligible for tax exemption may include government-owned buildings, nonprofit organizations, religious institutions, or properties used for specific purposes such as education, healthcare, or charitable activities.

Property tax abatements are usually temporary and typically last for a specified period, after which the owner resumes paying full property taxes. In contrast, tax exemptions are permanent and continue if the property meets the eligibility criteria outlined in tax laws or regulations. For example, as long as the IRS recognizes a 501(c)(3) organization, nonprofits will be tax-exempt.

Abatement Programs and Income Taxes

Property tax abatements structured as deferrals of property taxes may be subject to income tax. The IRS recognizes some properties or areas as a Qualified Opportunity Zone (QOZ), an economically distressed community where new investments may be eligible for preferential tax policies. Investors can take advantage of tax incentives if they invest the amount of a recognized eligible gain in a Qualified Opportunity Fund (QOF) and elect to defer the tax on that gain.

Any improvements made to a property during the abatement period may increase the property's assessed value. Should the owner seek to sell the property after modifications are made, they may be subject to capital gains taxes based on the time the asset is held.

The Bottom Line

To take advantage of property tax abatement programs, homeowners should research local opportunities by checking municipal websites or asking 澳洲幸运5官方开奖结果体彩网:real estate agents familiar with the area. While these programs can provide substantial savings, they have certain conditions and risks. Buyers should carefully consider the long-term impact of property tax increases after the abatement period ends, and the potential for neighborhood re🌱vitalization.