Tax abatement refers to many different programs that will cut or temporarily ease tax burdens on individual taxpayers, small businesses, or other parties taxed by federal or state government. In most cases, tax abatement is simply a technical term for a tax reduction or tax exemption. It is part of legal terminology for talking about the financial obligations of a taxpayer, and it is something that taxpayers may ask for through legal representation, lobbying, or other means.
Some kinds of tax abatements target homeowners. State or municipal governments might create these abatements when some kind of external condition destroys property values for some property owners. These abatements will affect property taxes for these taxpayers who have experienced a specific kind of hardship. The idea is that property owners who did not cause their values to go down should not still have to pay property taxes on an obsolete value.
Other abatements go to businesses in order to create incentives to attract them to the jurisdiction. Government might give tax abatements to a certain type of business to encourage hiring. This kind of abatement can also be a safeguard against a loss of business revenue for a state or municipality.
In general, the federal government uses tax abatements to provide incentives that will change consumer behavior. When the government cannot work through direct legislation, it can use the tax code to effectively change outcomes. Direct tax reductions or abatements can change almost any area of life, where a financial incentive changes mass behavior.
Allowances for deducting mortgage income from income taxes, tax credit vouchers for fuel efficient vehicles, and all other kinds of new and traditional programs are examples of tax abatement. Nearly everyone who follows current financial news looks at how the government is using abatements at any given time. Taxpayers and accountants also have to stay on top of these policies in order to know how to claim deductions or refunds on their annual tax returns.
Tax abatement comes in many forms. Sometimes, it is in a graduated rate of tax reductions for families. Other times, as in some of the examples above, a tax abatement is in the form of a voucher with a set amount for those who make a specific kind of purchase. Other tax deductions can be either short-term or long-term credits that are added into a household’s annual income tax. To many, the abatement is controversial when it helps or hurts specific taxpayers or businesses. Government always has to be responsive to concerns about the abatements that it provides to the public.