Can Home Renovations Raise Property Taxes?
As spring approaches, many home sellers awake from their winter slumber, hoping to list and sell their home for top dollar. The current wisdom suggests that renovating the home in the right places can oftentimes drastically raise the list price. Although true for many, home renovations come at a cost. Renovations take up time that the home could otherwise be on the market and they take up-front money. Most homeowners see both of these costs and plan their investment accordingly. However, many renovators forget that improvements to the property can also raise their own tax bills. Though usually not a deal breaker, its something many overlook when they are trying to determine whether a renovation will bring a solid return on investment.
Renovations can raise a home’s assessed value and therefore its property taxes. Local governments valuate homes then take a percentage of that value to determine how much each homeowner should pay.
Homeowners who are unsure of how a renovation may affect their assessed value should communicate with government officials before taking on a major project.
Generally, increasing the living space (square footage) of a home will raise a property’s value. Finishing a basement or an attic, for example, will also require a reassessment. Of course, adding additional bedrooms or bathrooms can almost guarantee a property value rise.
Kitchen renovations are very grey area, so checking in with local officials first will alleviate worries of reassesments. According to Realtor Magazine, even adding things like garden sheds or regrading lots for drainage issues can affect a property’s value.
Renovations can often be the best way to improve a property’s listing price. With a higher listing price, comes a higher overall home value, increasing property taxes. Homeowners should make sure that the renovation, as well as future costs, are properly budgeted to avoid having to squeeze by financially.