Property taxes are an ad valorem tax that the local government calculates based on the property’s value. The tax amount varies based on the changes in the property’s value.
Several reasons impact property taxes and make them go up. Property taxes are based on the state, municipality, or the town’s tax rate as well the property’s value. Any change in these drives property taxes up. A few changes are out of our hands, but property owners who feel they are not being fairly taxed can take steps to appeal their property taxes.
Home improvements and their impact on the spiking property taxes
Homeowners believe home improvements increase their home’s value and they do not think about the increasing property taxes that are awaiting. Any additions or re-model made to a residential property that increases its value will impact property taxes.
Many homeowners wonder what improvements increase property taxes. Is it adding a patio, adding a roof, or building a swimming pool? Will they all have the same impact on the property tax rate or will it vary for each kind of renovation?
Any improvement that makes a change to the property’s value will cause a property tax increase no matter if the renovation was just for fun or for a function. Say, for example, you plan to add a new roof to your property that increases your home’s value by $12,000 or build a patio that increases your property’s value by $50,000. The patio adds more value which will drive up your property taxes. Calculating the budget for renovation, checking the ROI, and multiplying it with the property tax rate will give you a guesstimate of your property taxes.
Taking the above example into consideration, say you plan to build a patio that is worth $50,000, and let’s assume your ROI is 60%. The value of your home would increase by $30,000. If you live in a place like Texas where the property tax rate is 1.69% then you can expect to pay an extra $507.
Other factors that drive property taxes
Have you ever wondered, “despite keeping my home just the same, why have my property taxes gone up?” External factors also have an impact on your home’s value and the tax rate.
Neighborhood
If your neighborhood becomes popular and if the sale price of homes nearby increases, the value of your home will increase as well without you having made any improvements to your home.
Allowing a tax assessor to inspect
Not allowing a tax assessor to inspect your home makes him feel suspicious that you are hiding your home improvements. This in turn might result in a higher assessed value and there is no strong way to dispute the assessment as the tax assessor is not allowed to inspect. The home is then taxed based on a potential value rather than its actual value.
State and local budgets
When the state government plans to fund a service, say, laying roads, property taxes might increase. An economic slump caused by the pandemic is making funding scarce as public services like health care, education, etc. are all working hard to serve people in need. If the federal aid isn’t enough to meet the needs, then the government might turn to increase the property taxes in order to raise money.
What can be done about the raised property taxes?
If you disagree with the local government on the assessed value of your home, you have the right to challenge the system. And, your tax authority should provide you with all the information on their dispute process which can help you prepare for the protest. Check the deadlines to submit your dispute and gather evidence.
Property taxes are a part of homeownership but it doesn’t mean the tax bills are carved on stones. Get to know your home’s valuation, compare it with your neighboring properties and ensure you pay what is fair.
Read here on how to protest?
Know more @ https://www.cutmytaxes.com/
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