In all states, it is a requirement for a property owner to pay property tax. The current market value of the property will determine the amount of tax that you will pay. Adding a deck is a home improvement that will increase the property’s value, hence increasing your taxes.
So, will adding a deck increase my taxes? Adding a deck will increase the current market value of a house, thereby increasing the tax bill. The local authorities assume that any permanent improvement in the house will increase the house’s value. The property tax from the house’s current market value; including when a deck is added means the property price goes up, which means the taxes go up, as well.
Your property tax is calculated from the property tax rate against the current market value of the property. Building a deck on the house will increase the property’s value, which means your property tax bill will increase.
A deck is a permanent fixture, and it will increase the current market value of the house. The costs of materials to build the deck will increase the overall costs of building the house. When an assessor comes by to check on your house’s value, they will increase the value once they notice the deck. Once the assessor updates your house’s value, you will notice that your property tax bill has gone up.
Permanent structural changes to the house will improve or decrease the value of the house. If you decide to remove certain things from the house and not replace them, the value might go down. If you decide to add a few things to the house permanently, its value will go up. Things that can improve your home’s current value include decks, swimming pools, sheds, or any other permanent fixture.
Property taxes for your house is calculated based on its current market value. A current market value is a professional opinion of what a property would sell for if the owner decides to sell it. An assessor will visit your home and inspect it, checking on things such as costs of the house, size, location, number of bedrooms and bathrooms, among others. The assessor will assign a value to the house, which will be used to determine your property tax.
The bigger and more visually appealing your deck is, the higher the property tax. The assessor will look at the deck’s quality; if it was built with expensive materials and covers a lot of space around the house, they will assign a high value to it.
A small deck made from cheap materials will increase the value of the house but not that high. If you do not want a huge increase in property tax, you should go easy on the new deck.
You need to consult and research how the new deck will affect your property tax bill. You might afford the deck’s construction costs, but it could be difficult for you to pay the new property tax bill and maintain the deck.
Check with the local tax departments; they might give you an estimate of your new property tax bill. You can also check with your neighbors who have new decks and inquire how much increase in property tax did their decks cause.
Is Building a Deck Tax Deductible?
Building a deck is not tax-deductible. Therefore, home improvements to your house are not tax-deductible. Home improvements have the exact opposite effect to the property tax; the more you improve your home, the higher your property tax becomes. When adding a new deck to the house, the tax benefits come after selling the house by paying capital gains tax.
For example, if you bought the house at one hundred and fifty thousand dollars and after adding the deck, you sell the house for two hundred thousand dollars. You will deduct the cost of building the deck; if it costs you ten thousand dollars, you will declare that the profit is forty thousand dollars.
The tax department may also allow you to write-off the sale tax of the construction materials. When you go to the hardware store to buy the materials to build the deck, you will pay sales taxes on the items. You should list the items purchased and keep the receipts. The next time you are filing your taxes, you can write them off.
The main reason why home improvements are not tax-deductible is that they are personal expenses. You are improving your home for your individual needs; hence you cannot declare those expenses. There are situations in which the tax department may allow tax deduction on a home improvement.
These situations include home improvements that are also medical expenses. If a doctor suggests that you make alterations to your house to suit the care provided to you or a family member, you can deduct the costs as long as they do not add value to the house. Some of the medical improvements include wheelchair ramps, modified doors, among others.
Some medical improvements will increase the house’s value, for example, installing an elevator for a sick person. You will reduce the amount of your deduction by how much the value of your house has increased.
Another situation is one where home improvements have energy use. You can deduct expenses incurred from installing energy-saving items such as solar water heaters, wind turbines, solar panels, among others.
Another one is rolling your home improvement costs into your initial mortgage. When you roll the expenses into your mortgage, the expense will accrue some interest. You can deduct the amount you pay in the interest on your taxes.
If you use part of your house for business, you can deduct part of the home expenses. As long as the business takes up more than nine percent of your house’s square footage, you can deduct the home expenses.
However, the expenses have to be incurred from one hundred percent improvement to the home’s business side. So, if the deck is installed on the part of the house you use as a business, for example, renting, you can deduct the expenses.
If you build a deck that will affect your home’s value, it is vital to keep the records of the improvements until you sell the house. If the tax department decides to audit your taxes, those records might help you prove your case.
The tax department might not believe those expenses; hence you should have evidence to prove your claim. Only keep the receipts of items that will improve your house’s value; simple repairs like fixing a leak do not affect the house’s value.
Adding a Deck May Increase Your Property Tax
The value of your house will determine your property tax bill. If you decide to improve your home by adding a deck to your house, chances are your property tax will increase. The deck will improve how your house looks, and that means its current market value will go up. When you decide to build a deck, the fancier you make it, the more property tax you will pay in the future.
The tax department does not allow people to deduct the expenses of their home improvements from their taxes. You can write off some of the sales tax from the materials bought to build the deck. If the deck is an improvement in your house that you use as a business, you can deduct the expenses. You can also deduct the expenses from the capital gains after you sell the house on a profit.