If you've been dreaming about how nice a daylight basement deck could be, make sure you think your plan through. When considering your building costs, don't forget that your property tax bill will likely increase when the deck deed is done. In most parts of the United States, property taxes get calculated based on each property's assessed value. If you make an improvement that adds value to your home, you'll also increase the amount of property taxes you pay. How much the bill goes up depends on where you live and how valuable the deck is.
TL;DR (Too Long; Didn't Read)
Decks and patios both add outdoor living space and increase a home's worth, which means adding a deck will increase your tax bill.
Valuing Your Home and Adding Deck Square Footage
Local municipalities set property tax rates and then apply them to the value of your home. When determining how much your house is worth, appraisers and assessors look at the home's size, age, condition and location. Some appraisers also take into account what it would cost to replace the home if it needed to be rebuilt. The home is then compared to other homes in the area. If your home has two bathrooms and most others in your neighborhood have only one, your home's assessed value will exceed that of your neighbor. If your home is smaller, however, or in need of extensive repairs, its value may fall below that of other homes in the neighborhood. This means you could pay slightly more or less property tax than those around you. Because taxing authorities charge a percentage of a home's value in property tax, adding a deck or finishing other projects that add value or square footage to the home also adds to the tax bill.
Assessing the Damage
So just how much will adding a deck hurt come tax time? It depends. The amount of value a deck adds to your home varies based in part on the rules where you live. In Chicago, adding a deck or screened-in porch won't change your property value or increase your tax bill. Adding a sunroom, however, will cost you. Desirability is also a factor. Adding a swimming pool, for example, can increase property tax values between 8 and 30 percent depending on where you live. It depends whether you live in an area where homeowners want a pool or in a colder region where outdoor swimming pools don't see much use and seem more a bother than a luxury. Size matters, too. A larger deck will likely add more value than a smaller one, so consider your deck square footage. If you're concerned about how much your tax bill will increase, call your local tax collector. He can likely estimate how much of an increase you'll see in your bill before you break ground on the project.
When the Tax Man Will Call
In most areas, adding a deck to your home requires filing a detailed plan with the city and obtaining a work permit. When the city realizes you're making an improvement to your home, they will give you time to finish the project and then send an appraiser to examine the deck and determine how much value it adds to your home. After the assessment your tax records will get updated, and your next tax bill will likely reflect your higher property value. You'll get a copy of the property reassessment detailing what the appraiser found and listing other information about your home. Most taxing agencies have an appeals process and will allow you to dispute the assessment if you disagree with the appraiser.
A Word on Cooperation
An increase in property tax and the cost of building permits both add to the cost of your new deck. If you're thinking about working around the permit process to save money and avoid a property reassessment and subsequent tax hike, you're certainly not alone. Think twice, however. Decks, swimming pools, sheds and other outdoor improvements are quite difficult to hide. If you do get caught building without a permit you could pay hefty fines, and your local government could force you to take the deck back out. These fines and costs could far exceed the cost of simply doing it right. It's also in your best interest to work with the appraiser who comes to look at your deck. While she is focusing on your beautiful new deck, you can mention some of your home's flaws or repair needs to remind her that not everything is shiny and new.
Michelle earned her accounting degree summa cum laude and has extensive experience in business management and accounting. Entrepreneurship is in her blood, and her work focuses on helping small businesses successfully compete in a big market. Michelle also knows the value of a dollar and enjoys helping readers understand how best to maximize their money and enjoy a healthy financial life. Her work appears Chron's small business site. She has also worked on small business blogs for a national insurance chain.