What is tax abatement?

Tax abatement refers to an exemption or reduction of local taxes for a specific project, typically as an incentive to encourage development or redevelopment in a certain area. This financial incentive can help to attract new businesses or stimulate growth in underdeveloped or economically distressed regions.

By reducing or eliminating property taxes for a specified period, municipalities aim to make the investment more attractive to developers and businesses. This can lead to job creation, increased economic activity, and overall improvement in the local economy.

Understanding how tax abatements work is crucial for real estate development, as they can significantly reduce the overall cost of a project and thus influence decision-making regarding where and when to develop. Other options presented, such as increasing tax rates, addressing past due tax collection, or conducting audits, do not align with the definition of tax abatement and its purpose in encouraging development.