The Impact of Home Improvements on Your Texas Property Taxes

If you’re a Texas homeowner, making home improvements can be exciting—but it can also affect your property taxes in ways you might not expect. While some upgrades can boost your home’s value and aesthetics, others might increase your tax bill. So before you break ground on your next renovation, it’s important to understand how home improvements impact your Texas property taxes.

How Home Improvements Can Increase Your Texas Property Taxes

In Texas, your property tax is based on the appraised value of your home, which is determined by your local County Appraisal District (CAD). When you make substantial home improvements, you may increase your home’s market value, leading to higher appraisals and, consequently, higher property taxes.

Here's how it works: once your improvements are completed, your home’s new value is reassessed, and the updated market value is used to calculate your property tax. The more valuable your improvements, the more likely you are to see an increase in your tax bill.

Common improvements that can raise your home's taxable value include:

• Adding a new room
• Building a deck or patio
• Remodeling kitchens or bathrooms
• Upgrading HVAC systems
• Installing a pool

In Texas, the average property tax rate is around 2.15%, so any significant increase in the value of your home can quickly add up on your annual tax bill.

Renovations and Capped Home Values in Texas

Texas has certain protections in place to prevent drastic property tax increases from year to year. Thanks to homestead exemptions, if you live in your home as your primary residence, there is a 10% cap on how much the appraised value of your home can increase annually, regardless of the improvements you make.

This means that while improvements may raise the overall value of your home, your property tax increase will be capped at 10% each year, providing a bit of relief for homeowners making major upgrades.

However, if your home is not your primary residence or you haven’t filed for a homestead exemption, this cap won’t apply, and your property tax bill could jump significantly.

Projects That Usually Don’t Affect Property Taxes

Not all home improvements will raise your property taxes. There are several upgrades you can make to your home that will boost its value or functionality without necessarily increasing your tax bill:

• Routine Maintenance: Replacing a roof, repainting your home, or repairing plumbing is considered regular upkeep and generally doesn’t affect your property taxes.
• Energy Efficiency Upgrades: Installing solar panels or upgrading to energy-efficient windows can increase your home’s efficiency and lower your energy bills without necessarily increasing your taxes.
• Landscaping: While adding curb appeal might increase your home’s value slightly, landscaping improvements typically won’t result in significant property tax increases.

In general, projects that don’t add square footage or involve major structural changes are less likely to increase your property taxes.

Estimating Your Tax Increase

If you’re planning a major renovation, it’s important to estimate how it might affect your property taxes so you can budget accordingly. To get a rough idea of how much your taxes might increase:

1. Determine the increase in your home’s value: If you add $50,000 worth of improvements, expect the appraisal value to increase by a similar amount.
2. Apply the tax rate: Multiply the increased value by your local property tax rate (around 1.8% in Texas).
3. Account for exemptions: If you qualify for homestead exemptions, apply those to reduce the final taxable amount.

For example, if you add a $50,000 addition to your home and your tax rate is 1.8%, your property tax could increase by about $900 annually, before exemptions.

What About Natural Disaster Repairs?

If your home has been damaged in a natural disaster and you’re making repairs, it’s important to know that disaster-related repairs are usually treated differently than voluntary improvements. In Texas, repairs made to restore your home to its pre-disaster condition typically won’t increase your property taxes.

However, if you make upgrades that go beyond simple repairs—like turning a damaged area into a more luxurious space or adding new features—you may see a tax increase. Make sure to keep detailed records of any disaster-related repairs and consult with your local CAD to ensure you aren’t being taxed unfairly.

How To Lower Your Property Taxes

Even if your home improvements raise your appraised value, there are still ways to lower your overall property tax burden in Texas:

• Apply for Homestead Exemptions: A homestead exemption can reduce the taxable value of your home by $25,000 or more, which can significantly lower your property tax bill.
• Appeal Your Assessment: If you believe your home has been over-appraised after making improvements, you have the right to file a property tax appeal. You’ll need to present evidence, such as the sale prices of comparable homes or appraisals from third-party assessors.
• Seek Energy-Efficiency Incentives: Texas offers various incentives and rebates for homeowners who make energy-efficient upgrades, such as solar panels or insulation, which can help offset property tax increases.
• Look for Tax Abatement Programs: Some cities in Texas offer property tax abatements for certain improvements, particularly for historic homes or homes in designated reinvestment zones.

Consider Working with Abode

Managing property taxes in Texas can feel overwhelming, especially after making improvements to your home. That’s where Abode comes in. Our experts can help you understand how home improvements will impact your property taxes, guide you through the process of applying for exemptions, and even assist you in filing property tax appeals to ensure you’re not overpaying.

Whether you’ve just completed a renovation or are planning one, working with Abode can help you stay on top of your property taxes and potentially save you hundreds or even thousands of dollars each year.