Abatement
Definition of "Abatement"
The definition of abatement is a reduction of penalties or a tax deduction for individuals or businesses. It can often be accessed upon an overpayment of taxes, if the company or individual receives a tax requirement that is higher than it should be, considering their previous overpay. They can request an abatement from tax authorities. The meaning of abatement is the decrease or elimination of an existing condition or a government tax.
How does abatement work?
The use of abatement in real estate is often an incentive for individuals or businesses. Cities offer abatements in situations when they want to attract shareholders to specific areas in the town, for example, the regions that are in the middle of revitalization or gentrification. Abatements can also be used for an entire city when the municipalities want to bring new residents in an area that has been depopulated by other large cities.
Buyers can use abatement by purchasing a property that is already under abatement, or they can buy a property then request an abatement based on improvements they want to make.
Abatements can decrease your tax bill substantially for the property, even if not entirely. The abatement can be for an extensive period of time, which can mean a monthly decrease in taxes of $200, yearly $2,500, or for ten years; the tax reduction can go to $25,000, like that the annual property tax might be $1,000, not $3,500.
In case the property is sold, the abatement continues with the new owner. It does not restart when the property owner changes, so it is more strategic to retain ownership if possible.
Examples of Tax Abatement
Individual
An individual that has purchased a home considers that the value of the property is higher than it should be. The new owner can require an assessment from the local tax assessor and inquire about an abatement. Some cities give abatement to owners that purchased historic properties and wish to restore them.
Company
A particular company is doing well, and the local government wants to keep it in the community. The government offers a form of tax abatement that reduces the company’s taxes on equipment purchased. It specifies that within the first year of abatement, the company isn’t required to pay taxes for the equipment, and the total tax amount is only required after the five years of abatement. As a result, the company can expand its business and hire more employees.
Popular Real Estate Terms
A horizontal beam connecting together two rafters supporting the roof. The collar beam is located at the point substantially higher than the wall plate connecting the rafters. The high ...
Also called profit and loss statement. A financial statement depicting a business entity's operating performance and reports the components of net income, including sales of real estate, ...
Mortgage loan not insured or guaranteed by a governmental agency such as the Federal Home Administration or the Veterans Administration. This type of loan is repayable in fixed monthly ...
That which remains. As applied to real estate, it is the profit derived from rentals after subtracting all operating costs from the gross rental revenue. ...
Tax term describing current and necessary business expenses. Ordinary and necessary business expenses do not include long-term capital losses. For example, the XYZ stationary store deducts ...
Failure, without sufficient reason, for one or both parties to perform the terms of a real estate contract. Breach requires unequivocal, decisive, and absolute refusal to carry out the ...
State tax based on the value of property received through inheritance. The tax is paid by the recipient not the estate. Tax paid to the government or state upon the death of the taxpayer ...
Home appraisals are required for many situations in the real estate industry. The most common instances in which any homeowner might be required to do an appraisal are selling your home or ...
Through real estate properties, many individuals of varying degrees of expertise find ways to make money. The real estate industry allows these practices as real estate properties are ...
Comments for Abatement
Why is there no abatement on development charges?
May 02, 2019 04:22:49Hi! Development charges cover the cost of bringing all the necessary utilities and municipal services to a new real estate development - roads, public transportation, fire and police stations, sewerage systems and the like. Abatements apply to the property tax temporarily, which means that homeowners and businesses will pay lower taxes for a certain period of time, thus making the area more economically attractive.
May 03, 2019 06:49:02Have a question or comment?
We're here to help.