As if there aren’t already enough factors to consider when organizing a home improvement project, don’t forget to add property tax assessments to the list. Property tax is a real estate tax paid by the owner of the property and is based on the home’s assessed value. Property tax characteristics vary by state, but generally speaking, remodels and renovations will increase the value of a home and subsequently result in an increase in property taxes. So, if you’re looking to make any home improvement updates, take into account the following guide to prevent a substantial spike in your property tax bill.
AVOID EXTENSIVE RENOVATIONS
Most renovations will subject a home to a reassessment since they are adding value to the home. While there is no precise list of taxable home improvements, some are more likely to trigger a reassessment than others. By and large, the most standard projects known to do so are:
- Improvements which add square footage to a home, such as adding a deck
- Any structural changes, like knocking down walls
- Renovations which increase living space (i.e., allows more people to live in the house) including additional bathrooms or bedrooms
It’s important to note that there are exclusions to taxable property projects, like regular maintenance and repairs.
STICK TO COSMETIC REMODELS
While certain home modifications are more inclined to generate a reassessment (like renovations that impact the structure and age of a home)—cosmetic alterations or remodels, on the other hand, generally do not.
However, there can always be a grey area when it comes to home projects that affect property tax assessments, according to public information officer, Michael Kapp. Take kitchen alterations, for instance; “If they’re replacing countertops and not extending them, it would probably not [trigger a reassessment],” claims Kapp. “If they add additional cabinets or move a wall, for example, that would trigger [a] reassessment.”
Given this, as well as the median cost of kitchen remodeling elements, your best bet for improving a kitchen without sparking an increase in your property taxes is to stick to basic cosmetic updates, like repainting walls and adding new furnishings.
CONSIDER YOUR SURROUNDINGS.
Since assessors will compare your home to similar homes in your area as a way to determine property value, be sure to take into account the neighborhood you live in before making any changes or improvements to your home. When comparing exteriors, the assessed value is typically higher for more aesthetically pleasing homes. Given this, keeping any modifications that improve curb appeal to a minimum will help keep your property tax low.
It’s equally as important to bear in mind the value of other homes in your neighborhood when making interior improvements as well. As far as home remodeling projects are concerned, kitchens are the most popular room to renovate. However, like your curb appeal, your kitchen should not be significantly more extravagant than those of other homes in your neighborhood, seeing as assessors use the current market value of a home to calculate property taxes.
CHALLENGE YOUR PROPERTY TAX ASSESSMENT
After a home improvement project, you will receive an updated property tax assessment with the cost of your remodels and renovations factored into your newly assessed value. However, if you believe your home’s assessed value is higher than it should be, it’s possible to protest or appeal your property tax.
Before initiating an appeal, do your homework:
- Verify the information the country has regarding your home is accurate (e.g., correct square footage and number of bedrooms)
- Research the assessed values of comparable properties near you to determine if they have an equal appraisal
- Consider current market conditions
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