What's Abatement?

“Guy, if I buy this house, will my property taxes be calculated based off my purchase price?”

This is a question I get asked quite often.  And is one for which most buyers are surprised to hear the answer.  What they are really asking is will their new property tax bill be lower than the property’s current tax bill.  Unfortunately the answers to both questions are “No”.  

Property taxes are calculated from a property’s assessed value.  And while the assessed values of many Washoe County properties are declining [another 15% according to a Tuesday RGJ article], most property owners will not see a decrease in their tax bills.  Why?

It has to do with a concept called abatement.  In 2005 the state passed AB 489, in part to provide tax relief for property owner.  Among other things, this law capped the increase to a property owner’s tax bill at 3% annually (for primary residences).  This meant your tax bill in any given year would be, at most, 3% more than your previous year’s bill amount.

It’s important to note that this “tax cap” applied to the amount of your bill, and not your property’s assessed value.  Therefore, as property values increase more than 3% annually, while tax bills were capped at 3%, an abatement was created.  Abatement is the amount of additional taxes that would have been owed if not for the tax cap.

Think of abatement as a deferred amount than can recouped in later years when property values are declining.

The Washoe County Assessor’s site has a very informative FAQ section covering a variety of topics, and I encourage readers to explore that site to learn more.   But if you would like to go directly to an explanation and example of how the tax cap and abatement process works click here:  Why did my tax bill increase when my assessed value decreased or did not change?