Why Are My Property Taxes Going Up?

Any town's tax assessor office will tell you the calculation of your home's property taxes is simply the assessed value of the home multiplied by the tax rate.  Many homeowners assume that when the current real estate market takes a down turn, causing the market value of homes to decrease, the same will fall suit with the tax assessed value of the homes; and, therefore, a reduction in property taxes is expected.

Unfortunately, this is rarely the case.  As a matter of fact, more often than not, property taxes continue to increase even when market values decrease.  Here are a few reasons why:

1.      State and local budget cuts.  Cuts at the state level result in decreased funding to the local municipalities.  However, local towns must still meet their budgets; and, as a result, property taxes are increased to cover the towns' budget deficits.

2.      Adding a bathroom.  While adding a bathroom may alleviate the need for scheduling shower times in the morning rush to get ready for the day, the additional bathroom adds to the assessed value of your home; which increases the property taxes.  The required permits filed with the town's building/plumbing/electrical inspectors provide the starting point for the tax assessor's assessment.  Some people avoid obtaining the permits in hopes of circumventing the increased taxes; however, that decision can lead to many problems when the tax assessor visits your home, and, even worse, when you try to sell.

3.      Renovating the kitchen.  A beautiful kitchen with granite countertops, cherry cabinets and Italian tile is many homeowner's dream.  It is also a great way to increase both the market value and the tax-assessed value of your home by changing the "condition" of your home.  A home's condition evaluation is often the basis for the tax-rate percentage - the better the condition, the higher the rate.  As a result, your property taxes increase yet again.  Again, circumventing the permit process is not the answer (see reason #2 above).

4.      Converting the garage into living space.  When non-living space is converted to living space, the tax-assessed value of the home increases because there is more space to evaluate.  Creating that in-law suite, man-cave or playroom out of the garage increases the livable square footage of your home; thereby increasing its value.

5.      A shed or a deck.  Even changes outside of your home, like a shed or a deck, can increase its tax-assessed value.  These simple "improvements" increase the home's evaluated condition and can potentially raise its tax-assessed value; and, subsequently, inflate your property taxes.

6.      A garden.  Pretty flowers, home-grown vegetables and ever-green bushes can be considered a "land improvement" and may result in an increased tax-assessed value of the land and corresponding property taxes.

7.      Non-existent fireplace.  An appeal and/or a review of your property tax assessment is a definite must-do.  Not all homes are physically assessed - especially if you live in a development of similarly constructed homes.  More often than not, the tax assessor will physically review one home and make similar assumptions about the neighboring homes.  As a result, your home may be assessed for objects it does not have - like a fireplace, granite countertops or high-end cabinetry.  A review/appeal of your property tax assessment will, at a minimum, ensure that your home's evaluation includes items physically existing within your home.

Your home's tax-assessed value is the only thing about your home that you actually want to be underinflated.  Understanding your town's property tax calculation and its components is the best way to ensure that your property taxes are being fairly assessed and calculated. 

(Based upon the article, "Things That Make Your Property Taxes Go Up" by Cindy Perlman on http://www.cnbc.com/id/40658494.)