Are you considering using a portion of your 2023 income tax refund to improve your home? Before starting renovations, consider whether the upgrades you plan to make will result in higher property taxes in the future.
Whether you are doing the work yourself or hiring a contractor, make sure to consult with local government officials to understand the relevant regulations in your city. Building code officials may require inspection of any work done to ensure compliance. Assessors may also want to review the work to determine if renovations have increased the property value and how much property tax you will need to pay.
Here are some common questions and information you need to know about home renovations.
In New Jersey, you have the right to refuse assessors entry, but doing so may not be wise. Refusing entry may lead assessors to assume that renovations have been made to the property.
In most cases, assessors will evaluate the property based on the highest possible value it could fetch on the open market.
Assessors usually assume all upgrades have been completed and that the property has all amenities available in the area, which often results in a higher assessment and increased taxes.
This is a dilemma faced by many New Jersey residents, especially when deciding to upgrade or needing more space in their homes.
With mortgage rates nearing historic highs and home values continuously rising, buying a new house may not be the best option. More homeowners are opting to renovate their existing homes to create the living environment of their dreams.
While this is a cost-effective way to obtain desired home amenities and increase property value, through consultation with building code regulations, tax assessments, real estate agent websites, and discussions with experienced home remodelers, it was discovered that any project might face a potential issue: home renovations could significantly increase property taxes.
Each municipal authority in New Jersey has its own set of regulations and requirements for any type of home renovation. Therefore, whether you are doing the construction yourself or hiring a contractor, it is essential to consult with local government officials to understand the relevant regulations in your city.
Generally, any project requiring permits and/or inspections could trigger a reassessment of the property value by the city you reside in, resulting in increased property taxes.
Many homeowners have not considered how a renovation project can affect their property tax bills, but experts suggest that it should be factored into your budget.
Not all renovations will increase your property taxes, but here is a list of common home renovations that are most likely to lead to increased taxes:
1) Adding to the home can increase taxes.
2) Repurposing existing space can boost home prices and taxes.
3) Installing an underground pool can mean higher taxes.
4) Hard landscaping like a terrace or courtyard can add value and taxes.
5) Kitchen or bathroom remodeling can influence taxes.
6) Driveway paving or repaving can affect taxes.
7) A new roof and its impact on the tax bill.
8) The solar property tax exemption can greatly increase home value.
9) Adding an outdoor shed can impact property taxes.
10) Summary
New Jersey has 564 towns spread across 21 counties, each with its own building regulations and rules.
Before starting any home renovation project, many contractors will advise you to call the local town hall to discuss your planned renovation.
Clerks, inspectors, and assessors deal with these issues daily and should be able to provide you with a reasonable understanding of your property tax bill.