A home addition could provide much-needed space to relax, entertain guests or pursue a hobby. It could also affect your property tax bills, but the amount and timing of the tax increase would depend on several factors.
How do Local Governments Assess Property Taxes?
Each city or town assesses property taxes according to a formula that considers its budgetary needs and local laws. Property taxes are based on the assessed value of a house, which can be determined by an individual home’s square footage and amenities and the characteristics and sale prices of the neighborhood as a whole.
Some local governments assess property values once a year, others every few years. Some only reassess property values when a home is sold, while in other areas, major home improvements automatically trigger a reassessment.
An addition that increases your home’s square footage and/or market value would most likely lead to higher taxes. Depending on where you live, adding another room could raise your property taxes by a lot or a little.
Don’t Try to Dodge Higher Taxes
Tax assessors often check to see if a permit was issued for home improvements before they assess property values, and in other cases, the building department automatically notifies the tax assessor’s office when a permit is issued. In some areas, field appraisers drive through neighborhoods looking for changes to houses. Some local governments even take aerial photographs and use software to compare images captured at different times to spot changes that could affect home values.
If you had work done without a permit, the tax assessor’s office could find out on its own, or a neighbor who was upset about the noise and mess or who had a beef with you for an unrelated reason could report the unpermitted work. That means you could face both higher property taxes and punishment for not obtaining a permit.
Even if you weren’t caught right away, you could encounter other problems. An addition built without a permit wouldn’t be inspected and approved, which means the contractors might perform shoddy work that could put your family and guests in danger. Unreported work could also lead to problems if you decided to sell your house in the future.
Find out How an Addition Could Affect Your Tax Bills
Improving your home by adding more living space could make it more comfortable for your family and increase its market value, but it would most likely raise your property taxes as well. The amount of the increase would depend on several local factors, and you might not get a higher bill until months or even years after you built the addition. To get specifics on what to expect, contact your local tax assessor’s office.
This article is intended for informational purposes only and should not be construed as professional advice.