10 Home Improvement Projects That Are Likely to Increase Your Property Taxes

Your home is due for an upgrade. Whether that’s a small facelift or a major overhaul, home improvement projects will usually add value to your home.

That’s a boon if you’re looking to sell your home or tap into your home equity, but it’s a burden when the tax assessor wants to update your property value and raises your tax bill.

Each state differs in its rates and treatment of property taxes. Some allow homestead exemptions on your primary residence, while others don’t. Here’s how much each of these home improvement projects will add to your tax bill.

Ready to trade in your master bedroom for a master suite? Longing for just one extra bathroom so you don’t have to share with guests? Why not expand your floor plan?

Home addition projects can cost anywhere from $4,000 to more than $280,000. The impact on your property’s value varies just as widely, too. That extra bathroom could add around $35,000, while your new master suite might increase your property value by as much as $165,000.

Keep in mind, though, that the bigger your home addition, the greater the potential tax increase. Adding that master suite could tack on an extra $1,650 to your tax bill each year.

Don’t have the budget for a full-on home expansion? Divide up an existing room instead. Building a wall that turns one room into two is fairly affordable, costing an average of $974 to $3,172.

Comparatively inexpensive though this renovation may seem, additional bedrooms can up your property value by $30,000 to $50,000. That’s because your home’s value is partly based on how many bedrooms it has.

And as long as those are large enough to be legal bedrooms, your tax value will increase. Adding a bedroom may raise your taxes from between $300 to $500 each year.

In-ground pools are a coveted home upgrade — and for good reason. Who wouldn’t want their own private swimming hole? Homeowners pay $38,000 to $100,000 for the privilege, and because this is a permanent land alteration, it can trigger a tax reassessment.

However, the ROI on in-ground pools is low, usually only in the 5% to 8% range. A pool would raise the value of a $400,000 house to roughly $420,000 to $432,000, putting the tax increase between $200 and $320 annually.

If you love entertaining outdoors, creating the perfect backyard oasis is probably at the top of your renovation to-do list. But installing an expansive deck or patio isn’t cheap. Depending on the material used, the average cost for these projects ranges from $9,000 to $24,000.

On the other side of your deck install, your property value could increase by as much as $14,000 to $16,000. The corresponding property tax increase would run between $140 and $160 each year.

Converting a basement or attic into extra rooms is another way to add value to your home. The National Association of Realtors (NAR) estimates basement conversions typically cost homeowners $57,500. Attic conversions are a bit pricier, around $100,000.

Still, the ROI — and thus, the potential property tax increase — on these renovations is quite high. You can expect to recoup around 86% of the investment in your basement conversion and 75% in your attic conversion.

This translates to a $495 tax increase for a new basement and a $750 increase for a renovated attic.

While new cabinets or updated appliances alone shouldn’t affect your property taxes much, a major room renovation can. If the before and after photos look like they were taken in different places, a tax reassessment may be in your future.

What you’ll spend on full renovations varies tremendously. A new kitchen could cost as much as $158,500 with upscale fixtures and features, whereas a modest bathroom update may only set you back $25,000.

The ROI on these remodels varies, too. The value of your new kitchen will increase your home value between 50% and 96% (the ROI is better on cheaper renovations).

Your bathroom update will give you between 45% and 73% back in increased home equity. The increased tax bill may be anywhere from $183 to $793 annually.

Any sort of outbuilding — whether it’s used as a workshop, a detached office, or an outdoor reading nook — can bump up your property value and, by extension, your property taxes.

And depending on how luxurious you want your shed to be, you could spend tens of thousands of dollars.

The national average, though, is right around $2,500. How much that will add to your tax bill depends on local regulations, the attitude of the appraiser, and even the stipulations of your HOA.

For instance, if your HOA doesn’t allow sheds, yours may decrease your home’s value. Your appraiser may ascribe no additional value to your shed or only the money it took to build it, especially if it’s not on a permanent foundation.

Unless you’re building an ADU or another livable space in your backyard, the average shed should only raise your tax rate by around $25 at most.

Roof replacements aren’t just essential; they’re also a surefire way to add value to your home. It’s a good thing, too, considering that roof replacements usually cost between $6,000 and $80,000.

You’ll typically see an ROI of around 57%, but that doesn’t necessarily mean you’ll pay more in property taxes.

Roof replacements are often considered routine home maintenance and aren’t always taxed the same way as other improvements. Still, if you upgraded to a different type of roof, you might see a change in your tax bill.

Here’s a smart money move for homeowners: Repair your roof after your annual property tax assessment so you get at least a year without the increase from the repair.

Also, consider using energy-efficient materials, which may come with a tax incentive or rebate to offset the cost of the tax increase and installation.

If your existing garage isn’t cutting it, you may be tempted to make it bigger. Perhaps you don’t have a garage at all, and you’re eager for a secure place to park your vehicle.

Whether you’re building your garage from scratch or expanding what you already have, plan to spend somewhere between $10,500 and $57,000.

Because attached garages are hot commodities, they usually deliver a 64% to 81% ROI. A new garage may not be counted as part of the home’s livable square footage, but it may add between $67 and $462 to your tax bill each year based on the home’s additional value.

To complement your fancy, new garage, you might want to pave the driveway leading up to it. You may think this home improvement project is more of a convenience than anything else, but consider the ROI: the average cost to pave a driveway is between $2,000 and $7,000.

And unlike many of these renovations, it often adds at least the value of the installation to your home. This puts the tax increase at a modest $20 to $70 each year.

When choosing which home repairs and renovations are worth the time, effort, and money, factor in the costs today and the tax increases your house may see in the coming years.

While it’s important to keep up with home repairs and maintenance, you may save more cash today and in the future by forgoing luxurious home projects and additions.