If you’re considering a home remodeling project, taxes are probably not the first thing on your mind. But some remodeling projects may have an impact on your real estate (property) taxes, and it’s important to know that before you get started.
Real estate taxes are calculated by taking your tax rates times the assessed value of your home. So if your remodel triggers a reassessment, and the value of your home goes up, then so will your taxes. (Your tax rate may also go up, so it’s important to pay attention to what your local tax authorities do during budget season.) Take a look at Maryland Department of Assessments and Taxation to check what your local tax rates are.
Not all home remodels will trigger reassessments. Updates that are primarily cosmetic -- like a fresh coat of paint or new carpet -- probably won’t increase your home’s market value. But if you make significant structural changes to your home -- adding square footage, tearing out walls, enclosing a porch -- count on a re-assessment. Plan on anything that requires a building permit bringing a re-assessment, and likely increasing your home’s value. (Don’t skip the permit process to try to fly under the radar, though. Particularly if you make a change that’s noticeable from the outside of your home, tax assessors will notice it when they do their periodic reviews, and you could face penalty fines along with the permit fees.) Assessors look at this as adding to your home’s “livable space,” so if you add a bathroom, they interpret that as meaning more people could live in the home — even if the square footage doesn’t change. That will likely bump up the value.
Keep in mind, too, how different rooms may be assessed differently. Bathrooms and kitchens, for instance, may be valued differently than a bedroom or office. So if you’re remodeling your basement and want to add a kitchen and a bathroom, that will likely increase your home’s value. Talk to a professional design-builder to see if there are workarounds or ways to get what you want without triggering a reassessment.
According to the Maryland Department of Assessments and Taxation, there is a local assessment office in each of the state’s 24 counties, and another one in Baltimore. To see what your local tax rates are click here, and for a list of assessment offices, click here. You can check the assessed value of your home before you start your remodel, and if you feel it is assessed incorrectly, there are ways to appeal.
This may be a dry topic, but we want you to be well informed! If you would like assistance or want your remodel to be handled (and managed) by a professional, give us a call.
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