When buying a new house, there are several expenses that come together to make up your monthly payment. Items include the mortgage payment, homeowner’s association fees, utilities, and more, but one expense that is often forgotten, or overlooked, is property taxes.
However, tax abatement can provide some relief from property taxes in the form of a temporary reduction.
What are property taxes?
Property taxes are a tax paid by the owner of a property to the government. These taxes are placed as a percentage rate of the value of a property and depending on where you live, those rates could be greater or less than the neighboring city or community.
But where does this money go? Usually, these taxes are imposed by the state and local governments, and the money goes back into the local community - funding facilities and organizations like schools, parks, law enforcement, maintenance of roads and trails, and other community-based needs. These taxes fund pieces of the neighborhood that many people appreciate (who doesn’t like bike trails?), and they can vary between states, cities, and towns.
What is Tax Abatement?
Tax abatement is a temporary reduction in property taxes or a specific period on the portion of assessed value added by new construction, or improvements to existing structures. Put simply, tax abatement can reduce some of your property taxes for a certain amount of time.
In Des Moines, the purpose of the tax abatement program is to encourage new construction and the rehabilitation of existing structures in and around the downtown core. Tax abatement in Des Moines is available in select communities and buildings, especially in older areas where revitalization has been done. The tax abatement program aims to incentivize the rehabilitation and beautification of these areas.
For example, if your new $300,000 townhome or condo in Des Moines was a building that qualified for the 6-year abatement schedule, in the first six years you lived in the house you would save over an estimated $22,400.
Tax abatement can also be implemented for various sets of time, but in most cases, you will see a 5-year or, in rare cases, a 10-year tax abatement.
What Does This Mean for Me?
For the buyer, this can mean significant savings for the abatement period and can be a game changer in affordability. Abatement programs are a great way to move into locations like downtown Des Moines, especially for first-time homebuyers who may be able to purchase a brand new home at a lower cost.
Where can I find available homes with a tax abatement?
In downtown Des Moines, Hubbell offers two types of housing with great tax abatement options.
Edison, a condominium along SW 7th Street, is a great example of abatement in action. These brand-new condos in Edison qualify for the Des Moines 10-year tax abatement program. This means if you purchase a 1- or 2-bedroom condo at Edison in 2021, you will follow the graduated abatement program through 2031. These gorgeous condos are just minutes away from all of downtowns’ restaurants, events and best bike trails with prices starting at $169,000.
Just four blocks away, Gray’s Station also has multiple varieties of for-sale townhomes that are eligible for a 6-year tax abatement. Townhomes with two-car garages ranging from the mid-$300’s to $600’s are available right now. Make sure to reach out to an agent to inquire about how much you could save on any of these homes