Updated: Dec 19, 2019
What happens to your property tax when you remodel your home, add floor area, or build a new house on your current property? Your property taxes will go up. But the more difficult question to answer is: “How much?”
I went to an educational event this year where Michael McTighe of Home Tax Experts spoke to residential architects about what our clients will face from the tax assessor once construction is completed on there single family residential property. Specifically those properties in the State of California where Proposition 13 is supposed to help keep property taxes low over the long term.
A little background first: In 1978 California’s Proposition 13 was approved and capped the amount the assessor is allowed to raise property taxes on a property to no more than 2% per year as long as the property has not been sold. This Proposition was brought on by a significant increase in the value and sale of homes that were raising property tax to levels that were a burden enough that it was feared that homeowners could loose their properties. By capping the amount the tax can increase per year, that should help keep the tax burden lower on those owning homes for a long term. But when the house sells, the new owner will receive a property tax bill assessed at the price the homeowner purchased the property and then be capped at the local rate (less than 2%) per year for the remainder of ownership.
Property taxes are based on the total assessed value of the property of which there are two components to the total value. One is called Improvements which covers the house and other structures. The other is the Land which only covers the value of the land.
Let’s now get to the question about what happens when you pull a permit for a construction project on your property. That event, pulling a permit from you local municipality, notifies the County Assessor that you are about to engage in a construction project on you property. It’s possible that someone from the assessor office will come by to see the property sometime during construction, at the completion of construction and/or review the construction documents (plans).
The assessor will look at other properties in your neighborhood that have recently sold and try to find at least two comparable properties. They will take into account the size, number of bedrooms and bathrooms and even the quality of the fixtures and finishes. When they have found comparable properties, they will use those sale prices to determine a “Fair Market Value” for both the Improvements and Land value of your property.
Depending on whether you have owned the property for more or less than 4 years at the time you pulled the permit for construction is whether the Land value will be included in the assessment. So, if you have owned your home for more than 4 years, only the new Improvements value (the value of the house and other structures) will be added to your total assessed value and the Land value should not change.
Now when you get that new property tax bill after your home has been assessed and you feel that it is too high and doesn’t reflect the work you did, it is possible to contest the assessed value. You have up to 4 years to file the dispute with the County.
Michael McTighe is a local Property Tax Agent. He can help you contest your property tax assessment. Find him at HomeTaxExperts.com.
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