We all know that home improvements—such as building a new deck, adding a sunroom, or installing an additional bathroom—can positively affect your property’s resale value. Transforming an unfinished basement into a rec room with a private washroom, for example, can boost a home’s resale value by as much as $50,000. But some improvements can also trigger a reassessment of your home’s overall value and may result in an increase to your property taxes. So how can you know what improvements to make now, and which to put on hold?
While there’s no defined list of improvements that trigger an automatic home value reassessment, a general rule of thumb suggests that any major improvement requiring a work permit from your community or local government is likely to result in a reassessment. This can include anything from a playroom addition to a full gut-and-rebuild. Property tax laws vary by state, but some general types of renovation are more likely to draw an assessor’s attention:
• Changes that would reduce the effective age of the structure, such as a complete remodel.
• Improvements that increase living space, such as the addition of a guestroom or transformation of an unfinished basement to a heated, carpeted playroom.
• A increase to the property’s footprint, such as a new multi-car garage.
Large jobs such as these require work permits, which alert your community assessor’s office that a re-evaluation of the property might be due during the next assessment period. Assessors look at room additions, basement renovations, re-roofing projects, and increased property footprints as signals to reassess. An assessor may even notice a renovation to your home simply by driving by. If for example the homes on your block were constructed with open porches, and an assessor sees yours is being enclosed for use as a guestroom, he may choose to reinspect the property. So if you’re planning to undertake a major home improvement project like these, be prepared to see a jump in your annual property tax starting in the next fiscal year.
Some forms of home improvement are less likely to result in a reassessment of your home’s value. Adding a porch that is not heated or insulated for winter use, for example, would be less likely to trigger a reassessment than would a fully enclosed, insulated, and heated porch—which could be seen as increasing the usable square footage of your home. Other improvements that are less likely to cause an increase in your property tax bill include:
• Repainting (interior or exterior)
• Addition of new flooring
• Minor roof repair (not full roof replacement)
• Repair to gutters, downspouts, and drainage
• Electrical repairs
If you’re planning a major home improvement project that you believe is likely to result in a property tax increase, you may want to ask yourself a few questions:
• How much will the project cost? Get estimates from your contractors and add 15% to cover potential cost overruns, delays, and unforeseen complications.
• How much value will the project add to my home? Check the sale prices of comparable homes in your area, and note of those with (and those without) the feature you’re adding to your home.
• When am I planning to resell my home? If resale is in your short-term plans, you may be able to reap the profits from your improvement without paying the year’s increased property tax.
• Can it wait? You may decide after crunching the numbers that your money would be better spent on repair and renovation jobs that are less likely to trigger reassessment, and to put of major overhauls another year or two.
At Home Tax Savings, we know that every dollar counts. We hope this post helps you make more informed choices about the home improvement projects you may be considering. If your property is reassessed and you feel the assessment is inaccurate, then contact us today and learn how we may be able to help you reduce your property tax bill!
HomeTaxSavings.com is wholly owned by Assessment Solutions, LLC and was established in 2016 as the nation’s first fully automated and integrated real estate assessment review and appeal system. The principals of HomeTaxSavings.com have worked in the real estate and IT world for over 100 years. Founders Keith McIntosh, Stuart Smith, Rachel Brown and Mandeep Sandhu possess a vast knowledge of the industry with many years of experience. The group is gaining wide popularity having covered The District of Columbia, Maryland, Virginia, Texas, Colorado, Georgia, Florida, California and Washington.
Disclaimer: This article is for informational and educational purposes only. The HomeTaxSavings.com website is not a market value appraisal, rather it is an assessment tool.