Remodeling Your Residence: The Potential Impact to Your Property Tax Assessment

Under the General Property Tax Act, an assessor cannot increase the true cash value as a result of expenditures for “normal repairs, replacement, and maintenance” in determining the true cash value of property for assessment purposes until the property is sold.  The law provides that the following repairs are considered normal maintenance if they are not part of a structural addition or completion:

(a) Outside painting.

(b) Repairing or replacing siding, roof, porches, steps, sidewalks, or drives.

(c) Repainting, repairing, or replacing existing masonry.

(d) Replacing awnings.

(e) Adding or replacing gutters and downspouts.

(f) Replacing storm windows or doors.

(g) Insulating or weatherstripping.

(h) Complete rewiring.

(i) Replacing plumbing and light fixtures.

(j) Replacing a furnace with a new furnace of the same type or replacing an oil or gas burner.

(k) Repairing plaster, inside painting, or other redecorating.

(l) New ceiling, wall, or floor surfacing.

(m) Removing partitions to enlarge rooms.

(n) Replacing an automatic hot water heater.

(o) Replacing dated interior woodwork.

If your construction work includes any of the above, the assessor cannot consider it for purposes of assessment.  However, if the scope of your project is outside of those listed above, the assessor may consider the changes and increase the taxable value of your property.  Further, the assessor, in determining a property’s taxable value can add any “additions” to the previous year’s taxable value.  As defined in the Act, “additions" include “new construction,” which in turn is defined as property not in existence on the immediately preceding tax day and not replacement construction. New construction includes the physical addition of equipment or furnishings, subject to the above (a) through (o) list of normal maintenance. For purposes of determining the taxable value of property, the value of new construction is the true cash value of the new construction multiplied by 0.50. "Replacement construction" means construction that replaced property damaged or destroyed by accident or act of God.

Therefore, depending on the nature of what construction activities you ultimately engage, the assessor could take that into account and raise your taxable value.

If you are considering a remodel or renovation project, it is important to know how your taxes may be affected. The real estate attorneys at Smith & Johnson, Attorneys, P.C. stand ready to assist with any real estate tax matters, whether with your local taxing authority or with the State of Michigan Tax Tribunal.

Authored by:  Andrew K. Shotwell