Home Renovations that Increase Taxes

Home Renovations that Increase Taxes

While most remodeling efforts do not come with any penalties, there are home renovations that increase taxes which you should be aware. The bad news is that many homeowners are unaware that there are certain renovations which affect their taxes until they see the actual bill.

So, it is very important to understand which type of renovation will actually boost your property taxes which may go up considerably if the remodeling effort improves the overall value of your home. You will want to check with your local and state agencies that govern how improvements affect the value of your home. For example, adding a new bathroom that does not change the overall amount of living space will not boost your property taxes in Chicago but it will in Los Angeles.

Adding Living Space

Many people correctly believe that adding a new wing or extension to the home will increase property taxes because the overall living space has been increased. However, turning an attic, basement or garage into a finished living space will also increase the overall value of your home and increase your taxes as well. This is because the value of your property is defined in large part by the living space that is present. Because attics, basements, and garages are not generally considered living spaces, turning them into a den, bedroom or family room changes their status.

Substantial Renovations

Another way home renovations that increase taxes may occur is when the remodeling expands the size of the area or items that are being remodeled. For example, if you are replacing your cabinets with something of the same size, then there is no increase in usable space. However, if the new cabinets and kitchen footprint is larger, then you are boosting the value of your home.

Of course, this includes renovations that would trigger a reassessment of the home itself. If you purchased a “fixer-upper” and remodeled it until everything was repaired, then you can expect the property value to be reassessed and you’ll pay more in taxes.

Anything that Improves the Value of Your Home

It may seem that all renovations will add to the value of the property. However, there are guidelines that you can use to anticipate home renovations that increase taxes such as adding a large deck, in-ground swimming pool, large shed or barn, and so forth.

Even making repairs to the home or changes that improve something that has been a part of the property for many years may bump your property taxes. For example, if you put screens around your front porch it will probably will not increase the property value but if you add insulation, drywall, flooring, and a HVAC unit so that you can use the porch year-round, your taxes will probably go up.

In the end, every city is different so it will be important for you to assess each improvement you make and consult with your local assessor and professionals to see what type of increase you might expect in your property taxes.