How Can Property Improvements Impact Property Taxes?

Spring is in the air and for some reason, this season puts many property owners in the improvement mindset. While that extra bedroom, massive storage room or property renovation may be only a quick permit away, keep in mind that your actions could impact how much you pay on future property taxes.

Whether you are performing a minor interior renovation or a massive remodel that requires a permit, here are some of the ways your actions can and cannot impact your property taxes.

What is Considered New Construction?

“New construction” is the key term you need to watch out for when you are debating making a renovation that could increase your property taxes.

New construction that costs you long-term cash in exchange for tangible and intangible benefits includes:

  1. Any renovation that adds square footage to the property
  2. A construction project that requires a permit for completion (i.e. structural changes, moving interior walls or a major bathroom remodel requiring changes to the plumbing)
  3. An addition to the property that adds value but not square footage (i.e. a carport to give employee’s covered parking or a swimming pool to enjoy in the summer time.)

When a major construction project on a property gets a permit pulled or attracts attention from city officials, expect a reassessment of your property value after the project is completed.

What About Natural Disaster Repairs?

If your property suffered from a natural disaster and you were forced to repair or maintain your property, as long as your build doesn’t add square footage, the construction is generally considered neutral for your property taxes.  If the damage has not been repaired by January 1, your taxes for that year should actually be lower and reflect the property value as it exists in its damaged state.

How Much can Property Taxes Be Raised?

Although your project may cost you thousands of dollars, don’t worry, your property tax increases may not always be an exact reflection of your project’s cost.

In the long-term, while you may end up paying extra in property taxes, , your business or your family will benefit from the changes you’ve made. Whether it’s your family living more comfortably or your office building being more attractive to future tenants. When your assessor arrives, ask about how the project will impact your next assessment.

Is There an Advantage to Higher Property Taxes?

While it may not be a walk in the park to pay a little more on your property taxes every year, the increase isn’t always going to be a curse on your budget.

Should you decide to sell your property in the future, the increased property value will increase your sale price, proving the success of your property improvement’s ROI.

Do You Feel That the Increase is Incorrect?

If you receive your property tax bill and end up balking at the increase, there could be a mistake on your assessor’s end. Mistakes happen, but without professional help on your side, a mistake can be costly. Keep in mind that an appraisal is an estimate.  It’s someone’s opinion of value and is subjective.

Fortunately, working with a property tax consultant can help you build a case to contest your property tax bill.

Understand Critical Property Tax Increases with the Hegwood Group

If you’re in the process of completing a major renovation on your property, reach out to the Hegwood Group to learn more about the tax implications your construction project may have. Contact us today to schedule an appointment with a member of our team.

We are Dallas’s most trusted property tax consultants and can help you answer any questions you have about your property taxes.

Tax word and 2020 number on calculator.