Homeowners across the United States are familiar with the fluctuating nature of property taxes. In years when home values are low, these taxes are typically on the low side. However, when values suddenly climb, the amount of annual property tax homeowners pay can skyrocket. This can become a real problem when an owner decides to put his or her home on the market. A high property tax bill can actually hurt the property’s resale value, scaring off potential buyers. This is one area where property tax abatements may be of benefit. These provisions make it possible for homeowners to lower their tax bills, easing their annual costs and increasing the likelihood of a successful home sale.

What is Property Tax Abatement?

Property tax abatement is an extended period when property taxes are either figured on a small percentage of the home’s value or eliminated completely. In most cases, tax abatements are only valid for a period of up to 10 years, after which time the tax bill returns to its normal level. These abatements are often offered by local county assessing boards in an attempt to draw homebuyers into certain neighborhoods or to encourage businesses to develop properties in the city limits. If a homeowner’s abatement is based on a lower percentage of the property value, he or she may only be required to pay tax on as little as five or 10 percent of the assessed value, giving them an annual property tax break of up to 95 percent.

There are several types of property tax abatements. Specific requirements vary by the area and the incentive. For example, some cities offer extended abatements to homebuyers who agree to purchase properties in neglected districts. Others may offer abatements for homebuilders who commit themselves to using environmentally-friendly materials and techniques. Cities that have experienced a long-running housing market slump may offer abatement programs for those who meet limited income standards.

Potential Concerns

While tax abatement may sound like a good idea, there are a few areas of concern. If a homebuyer receives tax abatement and then fails to pay the taxes, the board of assessors may revoke the abatement, causing the annual tax bill to increase dramatically. Those who attempt to get tax abatement for their existing homes may have to endure lengthy approval procedures and complete several documents in order to receive their tax break. In some areas, buyers may have to select a property in a less than ideal part of the city to qualify for lower property taxes.

If a homebuyer is able to qualify for tax abatement, he or she can save a considerable amount in property tax costs. The process of getting an abatement request approved may well be worth the savings.