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.
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.
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.
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.