Property tax abatement: Benefits & drawbacks for homebuyers

by Dana Dang 10/31/2022

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.

About the Author
Author

Dana Dang

Garden State Realty LLC is a boutique real estate brokerage firm located in Livingston, New Jersey representing clients and customers from all over the world. We have a great deal of passion and success in real estate using our unique business model, and built a reputation for excellence and professionalism.

The qualities and skills of an excellent real estate professional are integrity, updated market knowledge, marketing savviness, effective negotiation skills and a high-quality professional network, all of which are hallmarks of how our team operates.

We provide the very best service: putting our clients first, being good listeners as well as good communicators, and responding quickly to all your needs.