How a Five-Year Tax Exemption Actually Works

A Simplified Model of How a Five-year Tax Exemption Works

Property taxes phase in over five years — the owner pays conventional tax on the pre-improvement value the entire time

Tax on pre-improvement value (paid to city, county, and schools) Tax on improvement (phasing in — paid to city, county, and schools) Exempt portion (temporary — expires after 5 years)

Example: $50,000 land assessed at 2% tax rate, $100,000 improvement. All non-exempt taxes flow pro rata to city (43%), schools (37%), and county (20%).