Why Upgrading A Feature Of Your Home Results In More Property Taxes

You should be allowed to have a comfortable home, right? And you'd think that if something in your home wasn't working for you, you'd be able to remodel it, upgrade it, or add on to it as necessary. In theory, yes, you should, but in many cases, your upgrades will have to wait for you to get permission from your city or county's building permit office. And once they know about the upgrade, they can insist on a property value reassessment that could raise your taxes.

Permitted Upgrading or Remodeling Can Increase Your Home's Value

Many people upgrade their homes in little ways, such as adding a DIY painted accent wall or putting in some display shelves. These are nice and can help you get a little more money if you sell your home, but not by much. However, more extensive changes, such as remodeling your kitchen, upgrading your home's wiring and windows, or adding a new type of roof can increase the value of the home substantially. Your city and county want to be sure the changes don't make the house dangerous to live in or cause problems for the neighbors, hence requiring permits. But once the county knows about the upgrades, they'll want to know the new value of your home and change your property taxes, which are based on a percentage of the value of the home at the time of assessment.

Remodels and Additions May Be Exempt From Property Tax Limits

Some states place limits on yearly increases in property taxes. California's Proposition 13 is likely among the best known of these restrictions; this law limits annual property tax increases to the lesser of either 2 percent or the rate of inflation, with the base property tax limited to 1 percent of the home's value. However, new construction—which includes remodeling something into "like new" condition—may be exempt from those limits, allowing higher assessments and increases in property taxes. If your county or state has any similar restrictions on tax increases, double-check what effect remodeling could have.

What if the New Value and Taxes Are Too High?

It's never pleasant getting a tax bill, and it's especially unpleasant seeing a higher tax bill that your budget can't absorb. You still have options, such as abatement options or working out a payment plan. You'd need to contact both your county tax office and a property tax service to help you find the right path toward getting those taxes either paid or reduced.

Property taxes go toward infrastructure and services, so they do have a reason for existing. If you improve your home's value, the county will want to increase your taxes. A property tax service can help you ensure the taxes are correct and that you're taking advantage of all the rebates and abatements that you're eligible for.

For more information, reach out to a property tax services company.