What Home Improvements Increase Property Taxes? (Find Out Here!)
If you are thinking of adding on a new room or maybe a swimming pool, you may want to think again if you do not want your property taxes to go up. Any time you increase your home’s value your taxes will go up too. There are many types of home improvements that will increase property taxes.
Some of the most common home improvements that will increase your property taxes include adding a bedroom, a bathroom, or an entertainment room. Even if you enclose your front porch or add a deck, that can increase your taxes too.
Home Improvement Equals More Value Equals Higher Taxes
They call it a home improvement for a reason, after all. The renovations or additions you do to your home make it more valuable. With a more valuable property comes higher taxes. How much more depends on the tax rate in your area.
Your property is assessed by the value of your home so it is important to know what will and will not increase your property taxes before you start. So, if your home is assessed at $200,000 and your tax rate is 1%, your taxes would be $2,000. Add on $20,000 for a new room addition and your taxes will increase to $2,200.
What Can I Do That Won’t Make My Property Taxes Go Up?
There are some improvements that will not have any impact on your taxes. For example, if you paint your bathroom, replace your kitchen cabinet hardware, or get a new carpet in your living room, that will not do anything to your taxes.
In fact, even if the new carpeting or paint means you can sell your home for a bit more, the assessor has no idea because you do not need a permit and they cannot see these things from a drive-by. However, some cities and counties send an assessor to your home annually to assess the value.
Don’t Be Surprised
Most people are not really thinking about their property taxes when they decide to do a remodeling project. They are thinking about that beautiful new entertainment room or swimming pool they can enjoy. So, when your tax bill comes at the end of the year, you may be in for a surprise.
Installing an Inground Pool
Getting a pool may sound like an excellent idea and it will be a lot of fun to swim in, but it does not increase your property value much. While that is good news as far as property taxes go, it seems like a bad idea since you will not get much return on your investment (ROI).
The ROI of an inground pool is only about 7% to 10%. So, you are only looking at a $1,750 to $2,500 increase of property value for a $25,000 pool. Of course, this varies depending on the property tax rate for your city or county. But you get the idea. The good news is your property taxes will only go up about $18 to $25.
Painting Your House
Painting your home or putting siding on is one of the best things you can do to increase property value. The ROI of getting all new paint or siding on your home is about 75% to 80%. So, if you spend $3,000 on a paint job, the ROI is $2,250 to $2400, which is very good for your property value. And your property taxes will only go up about $23 to $24.
New A/C System
Getting a new air conditioning system installed only gives you a 65% to 70% ROI. Therefore, if you spend $5,000 on your new system, you will get a $3,250 to $3,500 ROI. But your property tax will increase about $33 to $35. However, your utility bills will likely go down, so you do not have to worry about the extra taxes.
New Cabinets Are A Great Investment
Getting new cabinets typically will not increase your property tax but will increase your property value. So, this is a great investment. If you pay $4,500 for new cabinets, your ROI is 75% to 83%. That means your property value goes up $3,375 to $3,735 but your property taxes will not increase at all.
New Windows Are Also A Good Idea
New windows are nice, and they can help you save on your utility bills as well so the ROI on these is different. But that means whatever your tax increase is, the savings on your utilities will probably make up for it.
The ROI on those windows is between 75% and 80%. That means if you spend $6,500 on windows, you will get an ROI of about $4,875 to $5,200. And even though your property taxes will increase about $49 to $52, your bills will remain the same or be even less with the improved utility costs.
Installing A Deck Has the Highest ROI
The highest ROI in home remodeling is adding a wood deck. The cost recovery is 80% to 85% so you will add almost as much value to your home as you spend on your new deck. But you will have to pay more taxes on it.
For a $10,000 wood deck, your property value will increase $8,000 to $8,500. But your property taxes will go up about $80 to $85 a year too. However, the increase is worth it considering how much value you add to your home.
How About A New Roof?
Adding a new roof is similar to getting new windows because if you do it right, you can decrease your utility bills on this remodel too. For this, the ROI is about 75% to 80% so if you pay $10,000 for a roof, your home value goes up $7,500 to $8,000 and your taxes will increase about $75 to $80 per year.
What About A Bathroom Remodel?
The typical bathroom remodel will increase your home value between 70% and 78%. That means your $11,000 bathroom remodel will get you a property value increase of $7,700 to $8,580. Your property taxes will go up between $77 and $86.
Garage Additions Are Not So Great
Adding on a garage is a great idea for keeping your cars protected and it will also lower your automobile insurance so the fact that you only get an ROI of 60% to 70% on this job is not that bad.
That $25,000 garage addition will get you a property increase of $15,000 to $17,500. Taxes will increase $150 to $175 per year, but your savings on car insurance will ease that pain a bit.
Kitchen Remodels Are Expensive but Can Lower Your Bills
Kitchen remodels are not a bad investment, especially if they include a more efficient plumbing and electrical system. New appliances can save you money on utility bills too. So even though you may have to pay more in taxes, the value of your home and lower utility bills is a big bonus.
The ROI on a new kitchen is 70% to 78% so a $30,000 cost will give you a return of $21,000 to $23,400. This will increase your property taxes about $210 to $234 a year. But, if you save even $20 per month on your utilities, this cost pays for itself and gives your home more value to boot.
How Do They Know?
But how do they know to raise your taxes when you do something like that? The main way the tax assessor knows when you make these improvements is from the permits and inspections that have to be done when you make these renovations. That is their job. To keep an eye on the properties in their district and apply taxes as needed.Even if you try to be sneaky and do a renovation or add a pool without getting a permit or inspection, the inspector will eventually find out. And if you get caught doing that, you will be paying a hefty fine too. Sometimes they just drive around and look at the homes and businesses in their district. It is on them to maintain the value of every piece of property in their city or county.
What Are the Costs of Common Remodels and Property Tax Increase?
Here is a breakdown of the most common remodels, the property value increase, the ROI, and the property tax increase.
|Remodel Job||Cost of Job||Property Value Increase||Return on Investment||Property Tax Increase (at 1%)|
|Install inground pool||$22,000 to $55,000||$1,540 to $5,500||7% to 10%||$15 to $55|
|Paint house||$2,100 to $5,200||$1,575 to $4,316||75% to 80%||$15 to $43|
|New A/C System||$4,100 to $8,000||$2,665 to $5,600||65% to 70%||$27 to $56|
|New cabinets||$3,800 to $6,000||$2,850 to $4,980||75% to 83%||N/A|
|New windows||$5,200 to $9,900||$3,900 to $7,920||75% to 80%||$39 to $79|
|Installing a deck||$6,000 to $20,000||$4,800 to $17,000||80% to 85%||$48 to $170|
|New roof||$6600 to $15,000||$4,950 to $12,000||75% to 80%||$50 to $120|
|Bathroom remodel||$7,500 to $19,000||$5,250 to $14,820||70% to 78%||$53 to $148|
|Garage addition||$22,000 to $43,000||$13,200 to $30,100||60% to 70%||$132 to $301|
|Kitchen remodel||$20,000 to $40,000||$14,000 to $31,200||70% to 78%||$140 to $312|
What is the Best and Worst Remodels to Increase Value While Keeping Property Taxes Low?
By far, the swimming pool may sound like the best idea, but it is not a very good investment. Not only does it cost more, it has the lowest ROI and increases your taxes to boot. In fact, in some areas, just having a pool in your yard makes your home insurance higher as well.
Getting a deck gives you the highest ROI but can also raise your taxes. The best investment is either the kitchen remodel, which lowers your utility bills, and has a moderate ROI, or the new windows, which have a higher ROI and decrease your utility bills as well.
I am a DIYer who loves writing about anything home-related. When I am not writing, you can find me studying for my PhD in Psychology, photographing nature, and swimming at the lake with my grandkids.
More by Patricia Oelze