We talk a lot about the value a new project can bring to a homeowner. It can be valuable for your quality of life, increase resale value, or create a new rentable space that generates income. The intrinsic value that comes with creating space for yourself or for
Once the permits for your new project have been filed, you may receive a letter from the county tax assessor’s office. They’ll want to know how far along your project is and what you expect to spend on it. The tax assessor needs this information to determine when your property taxes will increase and by how much.
When you do a major renovation or add a large addition to your property, you can expect your tax bill to go up. In California, we have seen that increase be around one-half of one percent of what you spend. So if you spent $300,000 total, you could expect a $1,500 increase in your annual property tax bill.
These are rough numbers, of course. Construction costs are usually a good indicator of market value, but your taxes are based on the assessed value of your property, not what you paid for it. Your county tax assessor may assess your new project as being worth a bit less or a bit more than you paid.
If you’re renting your property out, you’ll easily be able to recover the extra property taxes. If you’re using it for yourself or loved ones, you’ll need to think about whether your new space is worth the increase. (Most people decide that it is.) And everyone will want to consider the long-term increase in the property’s value.
The bottom line: Expect an increase in taxes equal to around one-half of one percent of what you paid for your project.