What is a Tax Abatement?
A tax abatement is an agreement between a taxing entity and a tax-paying entity that exempts all or part the increase in the value of real property from taxation for a period of time.
A Tax Abatement Example
- In the example below, a 5 year 50% abatement was given to a project that tripled its corresponding tax value.
- The base value, prior to the project, was $5. After project investment, the tax value is $15.
- The 50% abatement applies only to the increased value. In this case, the increased value was $10.
- After the term of the abatement (5 years), the taxing entity receives 100% of the new taxable value.
- A taxing entity will never receive less money than prior to the abatement