All That You Need To Understand About Tax Abatements

Buying a property is a huge decision. There are several things to consider, and you don’t want to end up making the wrong decision. Be it a commercial or a residential buyer; you need to ensure that the investment you are making is worth it. Certain programs can help the buyer take off the financial burden. One such opportunity is tax abatements.

Let’s discuss what Tax Abatement is?

Tax abatement is a financial incentive for the buyer. It reduces or completely eliminates the tax on the commercial or residential property. Some organizations offer tax abatement on the properties. These organizations include municipalities, state treasury offices, city governments, and the federal government.  

It is crucial to know that tax abatement is a temporary incentive and can last only for a couple of months to a year. Yet, in some cases, it can last for decades and, in even rarer cases, indefinitely. The tax abatement program depends on a particular type of property buyer. Some taxation entities are making revitalization efforts as well. And as a part of this, the entities can offer tax abatement programs in specific areas of a city or state. It also helps in boosting the value, integrity, and appearance of the neighborhood.  

It doesn’t matter what the reason is for taxation entities to offer the abatement programs.  For buyers, it is an opportunity to save money on buying property. They have reduced tax on the land or building that they are purchasing.  Therefore, before you invest your money on a property, all prospective buyers need to consult with their real estate agents regarding the abatement programs. This is applicable to commercial buildings, houses, or any other real estate that can be available with the tax abatements.

What is the purpose of Tax Abatement?

Now that you understand what tax abatement is, we can move on to its purpose. There are many reasons to offer tax abatement to buyers. The main one is offering an incentive for buying properties in a specific area. Tax abatement help make the area look appealing to prospective developers and buyers. For enjoying the benefits of the tax abatement program, they have to either live or do business in the area.  

Another reason behind the tax abatement program is stimulating the local economy. Construction of new properties can improve the economy of the area. It is because of this that the government entities offer tax abatements to most pre-existing homes. The buyer then has to renovate and improve the building to make it eligible for the property tax abatement.

Some tax abatements encourage the buyer to remodel the building into energy-efficient and eco-friendly properties. It is the responsibility of the owner to add elements that are environmentally friendly to the building. To receive the financial incentive of tax abatement, they have to perform certain tasks like installing solar panels, using environment-friendly materials, and making energy-efficient improvements.

The last purpose of the tax abatement program is increasing the value of the properties and improving neighborhoods. Without the tax abatement program, these properties can remain blighted or sit vacant for years. After the abatement has expired and the owner has made the improvements, the properties get a high appraisal value. This also increases the tax rate.

Who and what is eligible for tax abatements?

The qualification for tax abatement can depend on several factors. This includes the intended target for financial incentives and the type of offered incentive. In the case of some properties, the opportunity for tax abatement is already attached. In other cases, buyers need to apply and then get the property approved for abatement. There are some other programs where you have to renew your eligibility and application for tax abatement regularly. In other programs, owners have to take possession of the tax abated property in a given time frame. Failure to do so can result in the removal of tax abatement from the property. The owner will have to pay the complete property tax. The buyers must be aware of the tax abatement and its regulations before they make the investment. 


So Now, tax abatement seems like a good incentive. However, there are certain precautions to take before you jump on the opportunity. Usually, properties located in unpopular neighborhoods come with the tax abatement incentive.  In most cases, the crime rates in these locations are higher than others. So, even with the tax abatement, there is no definitive way of knowing that the property’s appraisal value will increase later.


Another point to look at is that the tax abatement is an expiration date. If it is a finite timeline, the owner of the property must be ready to pay the high property taxes. This can lead to a major toll on the property owner’s budget. Lastly, the authorities can rescind the tax abatement anytime. For example, entities can revoke the tax abatement on the property if the owner becomes delinquent with their tax payments.  


It is easy to make mistakes.

Tax abatement is a complicated process. And many times, taxpayers can face IRS charges. But, the IRS also offers penalty relief for people qualifying and requesting relief. Here are the categories available for the tax relief:


1. Administrative waivers

Under this, if your circumstances agree, the IRS will provide you penalty relief. The most common administrative waiver is the IRS penalty abatement known as First-Time Penalty Abatement (FTA). In other words Granted to people who fail to pay their penalty, the IRS penalty abatement is granted to people and businesses with a clean history.

2. Reasonable cause relief

IRS grants penalty relief to people and businesses who used ordinary business care and prudence. But they failed to follow the tax obligation. You might have to prove that failure to compliance wasn’t because of negligence. 

3. Statutory exceptions

There are specific circumstances for which IRS abates or waives penalties. For example, it doesn’t penalize people in combat zones.

4. IRS errors

In cases where the IRS makes an error, they will waive the penalty.

To avoid any penalties, it is best to let the professionals handle it. At the Platinum Tax Defenders, we guide you on tax resolution through the complete tax abatement process and tax relief. Tax resolutions services from our tax relief experts will help you make the most out of your money. So, call Platinum Tax Defenders today for a free consultation. 

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