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Tax abatements and exemptions overview

Some communities offer property tax incentives to developers who create or preserve affordable housing. These benefits can be structured in a variety of ways depending on local goals, but generally take one of two forms: abatements or exemptions.

Property tax abatementReduction or elimination of taxes granted to property owners by the government in order to stimulate publicly beneficial activities, such as investment in capital equipment.s directly reduce the amount of taxes owed for a specified period, and can be offered as an incentive to encourage the construction or rehabilitation of buildings that include a share of affordable units. Property tax exemptions reduce the property’s assessed valueDollar value assigned to a property against which is applied the local tax rate for determining a property’s tax liability. A property’s assessed value is generally the same as the appraisal of the market value of the property or a uniform fraction of the amount. that is subject to taxation, thereby resulting in a lower tax bill. Exemptions are commonly offered to encourage rental property owners to make upgrades that improve the condition of lower-cost units. The increased value resulting from the upgrades is excluded from property tax calculations for a defined period. Abatements can be used to directly offset the costs of improvements. Some communities also offer tax abatements or exemptions to owners who participate in project-based rental assistance and other housing subsidy programs.

Note: Communities can also provide tax relief to income-qualified homeowners, to help them stay in their homes as their property tax bills increase. Click here to access a description of this policy option.

 

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