Property tax abatement programs can be helpful to homebuyers in several ways. While they can help you save money long-term, buying a property with a tax abatement can have potential downsides. Here are some key things about property tax abatements for buyers to consider:
How Property Tax Abatements Work
Property tax abatement programs are offered by some cities and counties to significantly reduce or eliminate property taxes on a home with major improvements. You can either apply for an abatement on a property you already own or purchase a home with an abatement already established. If approved, you'll be able to pay taxes based on the value of the home before the improvements, potentially saving significant amounts of money.
What are the Benefits?
The savings on your property taxes are the largest benefit to tax abatement programs. If you're planning to buy a new home, finding a property with a tax abatement means finding a great deal on a home you might not be able to afford otherwise. Higher equity from improvements and rehabilitation equals higher property taxes, but purchasing a home with an abatement allows you to pay based on the value before the changes.
What are the Drawbacks?
There are some drawbacks to tax abatement programs homebuyers should be aware of. The primary downside is most qualifying homes for tax abatement are in neighborhoods with lower demand. Tax abatement programs are often used as incentives for buyers to help with urban development and revitalization.
The other major issue tax abatement can cause comes when the abatement period ends. If you live in the new home beyond the abatement deadline, your property taxes could suddenly increase. Staying aware of this deadline is crucial for avoiding unpleasant surprises on your annual tax bill.
While there are disadvantages to tax abatement, it can be an excellent opportunity for many homebuyers. Keep these factors in mind when considering your options for buying your dream home.
