7 Home Renos That Will Increase Your Property Taxes

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Counties calculate property taxes using two primary factors: a home’s assessed value and the local millage, or “mill,” rate. A county appraiser usually determines a property’s value based on the price of similar homes that have recently sold. Once the home’s value has been determined, this figure is multiplied by the local mill rate.

A mill is 1 USD in tax per $1,000 of assessed property, and the mill rate is the amount payable per dollar of assessed value. Local governments set their mill rate based on the value of property in the district with the goal of providing sufficient taxes to support local government spending.

Generally, home improvement projects that increase the home’s value will also result in property tax increases, but the following is almost guaranteed to do so.

1. Upgrades that are permanently attached to the property

10 Home Renovations That Will Definitely Increase Your Property Taxes (And What To Do Instead)

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Your neighbor installed an above ground swimming pool and you installed an in ground pool. Your property taxes went up, but your neighbor’s didn’t. Why?

The answer lies in the fact that any improvements permanently attached to the lot are considered “real property” and subject to property taxes. Anything not attached is considered “personal property” and is not taken into account when calculating property taxes.

RELATED: 9 things you should know before buying a house with a pool

2. Residential additions

10 Home Renovations That Will Definitely Increase Your Property Taxes (And What To Do Instead)

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Adding to the home’s living space will almost certainly increase the home’s value and, as a result, increase the taxes on the property. A home’s square meters of living space is one of the factors taken into account when assessing the home’s value. How much an extension will increase the value varies depending on the value of surrounding properties and the quality of materials used in the construction.

3. Certain structural changes

10 Home Renovations That Will Definitely Increase Your Property Taxes (And What To Do Instead)

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Not all projects that change the structure of a home will result in higher property taxes. For example, removing a wall between two small bedrooms to create a larger bedroom is unlikely to increase property taxes because it is unlikely to increase the home’s value.

However, building a wall in the middle of a large room to create two bedrooms can increase property taxes because real estate agents and appraisers typically add value for each bedroom the home has.

RELATED: These 15 States Have the Highest Property Taxes in the US

4. Deck add-ons

10 Home Renovations That Will Definitely Increase Your Property Taxes (And What To Do Instead)

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It’s on many homeowners’ wish lists – a deck for relaxing and entertaining. It will certainly increase property taxes as well. Outdoor recreation areas, whether concrete patios or decks, are monetarily taken into account when determining a home’s value.

But keep in mind that your property probably won’t increase in value commensurate with the money you spend. For example, according to Remodeling Magazine, you may pay $16,776 to add a wooden deck to your home, but your home’s resale value may only increase by an average of $11,038. Tax advisors look at actual increases in value, not just the amount you spent on renovations.

5. Space conversions

10 Home Renovations That Will Definitely Increase Your Property Taxes (And What To Do Instead)

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Converting a garage into a living space or enclosing a patio to create more living space will likely increase your home’s value and, as a result, increase your property taxes. Like appraisers, tax advisors assign a specific value to the total square meters of indoor living space.

Anytime you convert an existing exterior space into a living area, taxes will likely increase because your home’s living area has increased.

RELATED: 14 ​​Spaces That Blur the Line Between Indoors and Outdoors

6. Outhouses

10 Home Renovations That Will Definitely Increase Your Property Taxes (And What To Do Instead)

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A new storage shed, workshop or garage will likely raise your property taxes, but not as much as if you completed the same amount of space for interior living standards. Outhouses are valued based on size and material quality. Typically, the larger the structure, the more value it has, so the more you’ll be taxed.

The square footage of the outbuildings is assessed at a lower rate than the internal living area, but it is still counted in the total property value.

7. Finishing a basement

10 Home Renovations That Will Definitely Increase Your Property Taxes (And What To Do Instead)

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Many new homes are sold with unfinished basements, providing the new family room to expand in the future without having to add on to the house. Finishing a basement is a cost-effective way to add living space, but your property taxes will go up when the county assessor finds out. However, basement living is typically valued at a slightly lower value than living space above grade.

RELATED: How Much Does It Cost to Finish a Basement?

But wait, how does the assessor know about my reno?

10 Home Renovations That Will Definitely Increase Your Property Taxes (And What To Do Instead)

10 Home Renovations That Will Definitely Increase Your Property Taxes (And What To Do Instead)

It’s not a coincidence that you put an addition on your home last year and this year your property tax bill jumped. Periodically—typically every one to five years—the local county assessor sends out workers to determine the value of all properties.

They also have other ways to find out about improvements, e.g. tracking permissions. When you pull a permit before tackling a home improvement project, the office that issues the permit sends that information to the county assessor, who uses the data to adjust your home’s property value.

How much more do I owe in tax?

10 Home Renovations That Will Definitely Increase Your Property Taxes (And What To Do Instead)

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Trying to determine how much more you’ll pay in property taxes for an upgrade to your home is a guessing game, but there are ways to make an educated guess.

First, assess how much the upgrade will increase your home’s value. A local estate agent or professional valuer can help with that. When you come up with the appraisal for your home (with the added improvement), check out the property tax calculator from SmartAsset. Alternatively, you can call your local county assessor and ask how much more you owe in property taxes.

Related: 10 Ways to Lower Your Property Taxes

Do you feel you have been taxed unfairly? Appeal the assessment.

10 Home Renovations That Will Definitely Increase Your Property Taxes (And What To Do Instead)

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If you believe the county has assessed the value of your home too high after you’ve added a pool or an addition, you have the right to appeal the assessment. You must prove that your home’s value is not as high as they have determined.

Either obtain recent home sales records from a local realtor or hire an appraiser to come out and give you a professional estimate of your home’s value. A professional appraisal will cost in the neighborhood of $350 to $450, but if you live in a community with a high mill tax, it may be worth it to reduce your property taxes.

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