Here are nine reasons why property taxes go up:
Whether you’re buying or selling a home, you should be aware of the reasons why property taxes go up.
1. State and local budget cuts
Little of that is in the homeowner’s control. Aside from voting for elected officials, the only thing homeowners can vote on is the school budget.
2. Increases in public employee benefits
The average government employee has benefits that are 45 percent higher than their private-sector counterparts, according to the Labor Department. And thanks to unions and other legally-binding agreements, wages, pensions and health-care benefits are continually rising, even when the nation is in a recession and states can’t cover the costs. As a result, homeowners are tapped to make up the difference with property taxes.
3. Adding a bathroom
There are a lot of family homes out there that only have one bathroom. Homeowners often believe adding a bathroom will not only increase harmony in their home but also increase their home’s value when they go to sell it. That may be true but remember that your property taxes are calculated based on the value of your home. So if you’ve increased its value, you’ve now increased your taxes as well.
So how will the assessor know if he or she doesn’t come inside the house? In a word — permits. You need a permit to do any plumbing, electrical or major construction work in your house and it’s not uncommon for a tax assessor to check if any permits were filed when assessing the value of the home.
This is why some people try to sneak by without requesting a permit but that’s a can of worms you don’t want to open — it will create huge headaches when you go to sell the house.
4. Renovating the kitchen
It’s easy to talk yourself into a pricey kitchen reno because kitchens are what sell homes, right? Kitchen renovations have the most “bang for the buck.” And, if you do it now, you figure that you can enjoy it for a while — not just the next owners. Well, guess who else will be enjoying that granite countertop, mosaic backsplash, and cherry cabinets? The taxman!
Even if you don’t knock down a wall and expand the square footage of the kitchen, you’re still improving the “condition” of the home by upgrading from that cracked Formica and granny cabinetry. And the “condition,” be it poor, fair, good or excellent, factors into the assessed value of your home and therefore your tax bill. A tax assessor can find out about a kitchen renovation in one of two ways: Either by doing an internal walk-through for the assessment, which can sometimes happen, or, like with the bathroom, through any permits you’ve filed.
Never underestimate the “condition” and it’s contribution to your tax bill. In certain areas, that can mean a difference of more than just a few percentage points. And that can mean a difference of more than a few dollars.
5. Converting the garage into a living space
So, you want to bring your in-laws to live with you. You figure that you’ll save money by not paying for a pricey senior living center — and by not adding to the footprint, the square footage, of your home, by converting the garage into an extra bedroom or apartment for them. Not to mention, it’ll put some distance between you and them! That may be true, but you’ve now increased the “livable” space of the home, and in most states, that’s going to increase the value — and the taxes.
6. Sheds and decks
Even improvements to the outside, such as sheds and decks, add value to your home. In some states, a shed is only considered an addition of the square footage if it has a concrete floor, but often, it’s going to be classified as an improvement to the home, increasing the home’s value — and your tax bill.
7. A garden
A garden, flowers, and vegetables may seem unassuming. However, they can also sneakily increase your property taxes through what is called an alteration of land improvement.
8. Imaginary fireplaces
It’s always recommended that you appeal your tax assessment — or at least review the assessment with the tax assessor. First, if they don’t do an interior review of the home, but they see you took a permit out for, say that kitchen reno, they’ll probably estimate the value of the renovation based on other renovations in the area, And if your neighbors used higher-end materials than you did, that guesstimate is going to be too high and inflate your tax bill. Remember, there’s always the possibility of human error. A few years ago my husband and I met with our tax assessor and discovered he’d put us down for a fireplace that we don’t have. That inflated the value of the home by $5,000! If we didn’t appeal, we would’ve been paying taxes on that imaginary $5,000 fireplace.
9. A golf course
The location of your land is an important component of your home’s valuation and taxes. If you live close to town or a pretty lake, that’s going to mean higher taxes. Pay attention to local construction. In the same way that construction of a new highway or chemical plant close to a home can dent its value, the addition of a golf course, lake, or other amenities can boost the value of a home — and the tax bill.
The bottom line
We all want the value of our property to go up. However, that also means an increase in property taxes.
So, if you really want your property taxes to go down, what can you do? Participate in the public process by voting for elected officials whose stance on taxes aligns with yours. Also, make sure you\take advantage of the opportunity to vote on your school budget.
And of course, never, ever underestimate the value of being nice to your tax assessor!