When it comes to owning a home, there are a lot of things to consider besides what kind of house you want and where you want to live. Owning a house means paying for property taxes which goes to local governments so you, as a resident of that district, can benefit from the public services they have to offer. This also means that your home’s value can either increase or decrease depending on the changes you make to it.
Your state’s local appraisal district usually determines property tax. How it works is that an appraiser visits each property and reviews any changes that were made since the last time it was appraised. Appraisers usually asses the size and kind of improvements made to your property, its quality, and current condition, plus your property’s characteristics. With these, the appraiser will determine how much tax you need to pay based on your property’s value.
Defining repairs and improvements
Knowing that appraisal districts review your home before determining your property tax, it does raise the question of whether or not some districts are penalizing homeowners for repairing their homes. There’s a difference between repairs and improvements, something that most homeowners constantly overlook.
Improvements are changes that you make to increase the value of your property while repairs are changes you make to ensure that your property is well-maintained and in good condition. It sounds simple by definition, but oftentimes, the lines are blurred when it comes to repairs and improvements. When you change your roof because of a leak, it’s usually considered an improvement instead of a repair because having a new roof increases a house’s value.
Should repairs be penalized?
Because of these grey areas, the question about whether or not appraisal districts are penalizing homeowners for repairs arises. While it makes sense for any new improvements made to the home be included in property tax, repairs can actually be deducted in your taxes for the current year. Repairs are not improvement mainly because they maintain the house and restores it back to its previous condition, not add value to it.
The idea solution to determining whether or not a change in your home is an improvement or a repair is to hire an expert, like an accountant or lawyer, to help you. Considering that there are many grey areas when it comes to property tax and appraisals, the best thing for you to do is to consult rather than to assume. If you are renting a home, it’s especially hard to define these grey areas as some homeowners let tenants on the property and do “repairs” that can actually be considered improvements.
Understanding the value of your home and how much you could either gain or lose from it with any major changes you might do is a good way for you to manage your living expenses. Knowing the difference between repairs and improvements can help you understand your property taxes better so you can get the most out of your money.
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