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3 Factors That Might Increase Your Property Taxes

Property tax is a tax that must be paid on any real estate you own. This tax includes both the land on which the property is located, as well as the value of the property itself.

However, one of the most important things to remember about property tax is that it is not fixed. Different states have different regulations and as the value of a property increases, so does the rate of tax.

Understanding how property tax works can seem complicated, especially for first time buyers. So, let us discover 3 factors that might increase your property tax rate.

Moving to a New Area

It might seem intuitive, but property tax rates vary by city, county, and state, and therefore if you move to a more expensive area it is highly likely that your property taxes will increase too. Property tax rates are calculated on a yearly basis by multiplying the baseline property tax rate by the assessed value of your home. This means that if you move to a home of comparable value in a new neighbourhood or state, there is always a chance that your property tax rate will differ. Reaching out to a local realtor can help you to understand the rates in a new neighbourhood. For example, if you were thinking about moving to Winston-Salem in North Carolina, this website could be a useful resource: https://www.winstonsalemhomes4sale.com/winston-salem-property-taxes

In some cases, multiple municipalities can even impose taxes on the same property. Furthermore, sometimes, there is a chance that you might accrue additional property taxes if you move downtown from somewhere outside the city limits. All that being said, sometimes the reverse is true. For instance, there are cases where moving can result in a lower property tax bill. High property tax areas usually contain schools, libraries, park districts, community colleges, and other public amenities nearby, so if you do not require these services moving somewhere more isolated could lower your property tax.

Home Improvement Projects

Completing renovation work on your property can lead to a reassessment of the value of your property. If a home improvement project adds square footage to your home, then it will almost definitely boost the assessed value of your property. It is not just expansions that must be considered either. Installing a pool, adding an extra shower, or levelling your lawn can trigger an increase. While this can be beneficial in the long run when viewing your home as an investment, renovating typically also results in a larger tax bill upon reassessment. 

Put simply, any home improvement project can increase your property tax rate. With this in mind, before renovating any aspect of your property it can be helpful to do some research to ensure that you are adding enough value to your home to offset any potential property tax increases. You need to make sure that any investments are worthwhile. That being said, it can be difficult to determine by exactly how much your property taxes might increase. Nevertheless, there are some brilliant cost vs. value reporting tools and tax calculators out there online that can provide a reliable estimate of any increases based on your location.

Increased Home Sales in Your Area

Another reason that property tax bills can jump is when there has been a spike in the number of sales in your neighbourhood. In essence, if there are more sales in a particular area, it can be assumed that the neighbourhood is deemed to be a desirable place to live, and therefore the property prices should reflect this. Similarly, any nearby construction projects can also increase the value of your home. This can include new homes, as well as amenities such as parks, golf courses, and lakes.

Usually, counties assess the value of their homes every few years, although there are some states where properties are reassessed annually. At this time, the county assessor appraises the value of a property based on any home improvement additions, nearby construction projects, and comparable properties sold in the same area. The final rate of property tax is also influenced by state and local budget decisions. So, if a public service in the area gets cut or requires funding this can have an impact on real estate sales as well as your property tax rate.  

Ultimately, it is crucial to remember that property taxes are a deductible expense. This means that they can be used to lower your federal income tax bill. Above all, if you think that your property tax assessment is incorrect, or if you believe that the value of your property has declined, you might want to consider requesting a reassessment. Simply fill out the relevant forms on the website for your county tax assessor to determine whether you could be entitled to a reduction in the rate of your property tax.

Understanding property tax is vital if you are thinking about investing in real estate. To learn more, check out this essential guide to making money from property.