One question that may cross your mind as you’re considering a remodel of your Naples-area home has to do with how remodeling can influence real estate taxes on your home. We’ve talked before about how improvements can increase the value of your property, and that certain projects have a higher return on investment (ROI). But what happens at tax time?
The short (and perhaps overly simple) answer is that it can result in an increase in your property taxes. Your property taxes are based on the value of your home. That means that if the assessed value of your home increases, your property taxes will increase as well. However, it's not always a direct correlation.
The Key Word is “Assessed”
Here’s an example of what we’re talking about. According to the 2016 Cost Vs. Value Report, for instance, an upscale bathroom remodel could cost you approximately $54,000. But that doesn’t mean the value of your home automatically increases by that amount. According to the report, a homeowner could expect to recoup close to $40,000 from that improvement. But your tax bill isn’t calculated based on what you spent or on what you’ll recover. It’s based on the assessed value of your home. How much is your home estimated to be worth in today’s market?
Obviously, if you put on a major addition and dramatically increase the size of your home, your home will probably be valued considerably higher. There are, however, other factors at work. If your neighbors’ homes increase in value, it can also affect (increase) the value of your home.
The Paper Trail
So how do the Collier County assessors know that you’ve made an improvement to your home? One thing they can do is look at the permits that have been pulled to do work on your home. Those permits are a kind of paper trail that indicates you’ve had work done (Those permits, by the way, also protect you by ensuring that the work has been done properly). Even if you didn’t pull a permit (not pulling a permit is a bad idea, by the way), you’ll eventually need to pay the piper. That’s because county assessors track sale prices when homes are sold and use those figures to reassess the taxable value of similar homes in the neighborhood. As prices increase in your neighborhood, so will the tax assessments.
Value Isn’t Always Measured in Dollars
While it’s simply smart to be aware of the return on your investment—and even how that investment can impact your taxes—it’s probably not the deciding reason for your remodel. The real value in remodeling comes from the increased comfort, convenience, and enjoyment your remodeled home will bring.
Make It Part of Your Budget
One way to approach the situation is to simply build potential increases in taxes into your remodeling budget. You can begin by looking at your current tax assessment. Bear in mind that this is an approximation. Values can change. If you want more specific information you can address your questions to the Collier Country property appraiser's office at 239-252-8141 or check with them online at www.collierappraiser.com.