Fix up the house, fend off tax woes

Your Money

May 16, 2004|By Ilyce R. Glink

Gwen Biasi spent last summer becoming an outdoor grill specialist. She didn't have a choice - that's how she survived the kitchen remodeling project at her Mount Prospect, Ill., home.

"We have Corian countertops and ceramic flooring, light maple cabinets and white appliances," said Biasi, who directs marketing and communications for the National Association of the Remodeling Industry. "We're very happy with it."

What she isn't looking forward to is next year's reassessment of her home. Her taxes are probably going to go up.

"It's one of the deferred costs of remodeling," she added.

Deferred or not, many homeowners are surprised by a higher tax bill once their remodeling job is complete. You might wonder if Big Brother is following you around your local home-improvement store. The truth is the tax assessor gets the information from the permit application filed with your local building department.

The next time your home is assessed, your taxes could go up based on what you've done to your home and how much the value has increased as a result.

Not every remodeling job you do is going to trigger an increase in your taxes, Biasi said.

Generally, property taxes are based on square footage. If you add to the square footage, you're much more likely to see an increase in your taxes than if you add new tile to an existing bathroom.

"Making repairs or replacing items like windows, the roof or even the siding doesn't generally trigger an assessment increase," Biasi noted, adding that putting on a second floor to a ranch home could significantly increase the property tax bill.

Here are some smart ways to defer the tax cost of your home improvement project as long as possible:

Before you hire the contractor, pop into the tax assessor's office to find out how often your home is reassessed, and when the next reassessment is scheduled. In some communities, homes are reassessed annually, so there's no advantage to timing your remodeling project. But if your home is assessed only once every three to five years, it might pay to put off the project until after your next reassessment.

While some communities require permits for nearly every home-improvement project, others are more lenient. Don't pull a permit if one isn't required for your job and you won't unnecessarily tip off the tax assessor. But if you are required to pull a permit and don't, you'll have penalties to pay on top of a higher tax bill.

See if you qualify for special tax reductions. Various counties and local municipalities offer tax exemptions to homeowners who remodel. In the state of Washington, homeowners can qualify for a tax exemption on the increased value for up to three years. In Cincinnati, even if your remodeling job increases your home's value by $50,000 to $150,000, your property tax increase will be based on only the first $50,000 of appreciation for up to 10 years.

Keep fighting your property taxes. Even if your tax bill goes up, you still have the right to appeal the assessment. What you need to do is prove that other homes that have the same classification as your house pay less in taxes than you do. Take photos of similar homes in your neighborhood, check out their tax bills (you can get this from the tax assessor's office or its Web site) and create an easy-to-understand appeal.

Ilyce R. Glink is a Tribune Media Services columnist.

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