Property Tax Reduction 101

You may have heard the term "property tax reduction" and wonder what it is all about. Basically reducing something means reducing it (or eliminating it). Therefore, a property tax reduction is a short-term or long-term arrangement in which property taxes are reduced even though you have made improvements to the home. Under normal circumstances, when the value of your home increases, so does the taxable value. With the reduction, this increase does not occur (or at least not so much). Typically, a waiver is issued as an incentive to encourage the revitalization of the city.

Property tax reduction is offered to owners of houses, condominiums, duplexes, multiplexes, apartment buildings, and commercial buildings that are converted to residential dwellings. To qualify, your home's value must be at least 115% of its value before remodeling. The reduction is not something you will automatically receive. To earn it, you must request it. The first step is to contact your local court, municipality or city council and ask them about it. They will have information available as well as forms for you to fill out. They can also arrange for an assessor to come out and assess the value of your home before and after the updates.

If approved, you will be tax-exempt on most of your updates. These include roof repair, siding, lawn and garden improvements, driveway repair, room remodeling, resurfacing, plumbing, and electrical repairs. The only thing it doesn't cover is the addition of actual rooms, showers, porches, and fireplaces. This reduction will remain in effect for as long as your location provides it. Generally, the tax is raised again from its lowest rate to the new rate over a period (for example, 5 years). Your locality can provide the details.

Keep in mind that even if you are approved, there is no guarantee that your taxes will not increase. It just means that they won't go as high as they would otherwise. You may still see an increase, especially if you make improvements to your home that are not included in the list of improvements eligible for tax reduction. Still, reducing your property tax abatement is a good way to save some money when upgrading your home or residential building.