In California, property taxes come into play during property transactions, and they may see an uptick when engaging in remodeling or home improvement endeavors. If you’re contemplating home upgrades, it’s crucial to understand which projects might lead to higher property tax assessments. While remodeling can enhance your property’s value, it’s equally important to factor in the potential impact on your property tax obligations. Navigating this can be tricky, which is why we aim to guide you through what home improvements increase property taxes in California.

Factors Influencing Property Taxes in California

Let’s begin by looking into the fundamental factors driving the property tax figure and how it is ultimately calculated. The annual property taxes you’ll pay as a homeowner will be decided using what is referred to as assessed value.

Tax assessors will look at the details and fixtures of your home, its location, current trends, amenities, and square footage, and use a matrix to give an assessed value. You will then be taxed a maximum of 1% of the assessed value.

Currently, the average tax percentage paid in California is 0.76%. Each local authority will set its own tax percentage. Currently, San Francisco offers the lowest property taxes at 0.65%, while Kern County has the highest, charging 1% per annum.

Carrying out certain home improvements on the property will increase your property tax bill. You will require a building permit for most large building projects that could increase property value. Tax assessors are notified when any building permits are applied for to recalculate the property value, resulting in a higher property tax bill.

does your property tax increase when you remodel

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Proposition 13

Proposition 13, a significant property tax measure approved by Californian voters in 1978, brought about a major overhaul in property taxation within the state. This landmark initiative limited property tax rates, capping them at 1% of a property’s assessed value.

Additionally, it constrained annual assessed value increases to a maximum of 2%, irrespective of market fluctuations. In California, properties were only reassessed in the event of a change of ownership or significant renovations, a measure put in place to provide stability for long-term homeowners.

Proposition 13 offered homeowners some much-needed relief. Nevertheless, its effects on local government revenues and property tax discrepancies continue to spark talks about necessary reforms. One topic of debate is whether commercial properties should undergo reassessment more frequently.

Tax Assessment Process in California

Under Proposition 13, property taxes will only be reassessed when a property is sold or new construction is completed. This is called the base year value. Once an application for a building permit is complete, tax assessors will be notified to reassess the value of your home.

Not all home improvement projects that increase property require a permit, so they can also use the following sources to reassess property taxes:

  • Information from Business Property Statements
  • Field Inspections
  • Documents with evidence of required governmental inspections or approvals

california property tax assessment after remodel

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What Triggers Property Tax Reassessment in California Remodel?

Understanding exactly what causes property taxes to be reassessed on your home can help you make the right decisions around a remodel. It is important to remember that not all home improvements increase property taxes.

Fundamentally, increasing the square footage of living space on your property will call for a reassessment, as will any tweaks and changes that add more than 50% to the value of the home in a single year. For the most part, tax assessors will wait for homeowners to notify them about changes, so don’t forget to let them know when you have made changes that may require a property tax reassessment.

If you have obtained a building permit and are yet to notify a tax assessor, they will carry out a reassessment at a later date and back-charge you from when the home improvement work was completed. If you are still determining whether your home improvement project requires reassessment, the safest bet is to report it anyway and let a tax assessor decide if there should be an increase in your tax rate.

As a basic rule of thumb, if your project includes any new construction, additional square footage of living space or large-scale home upgrades will lead to property tax increases.

Does Remodeling Affect Property Tax in California?

It is a myth that all home improvements will result in a tax increase, as there are many projects you can invest in that will not require reassessment. For example, remodeling existing rooms, painting both the interior and exterior and replacing flooring won’t see an increase in your property taxes.

Replacing the windows in your property could also be completed without you having to pay higher taxes. A full window replacement will increase the value of your home, but unless it is valued at the $25-$50 per square foot range, it won’t be substantial enough to raise tax rates.

Does Adding A Room Increase Property Taxes?

Adding a room to your home will increase property taxes, as you will increase the livable square footage. This falls under the banner of new construction, and although you will be using existing space, making it habitable will call for a reassessment.

The size of the room and the potential increase in the value of your home will dictate exactly how much your tax bill increases.

Does Adding an In-Ground Pool Increase Property Taxes in California?

The construction of an in-ground pool will require a new assessment and increase your property taxes. An in-ground pool is a large-scale home renovation project requiring a lot of construction and will add substantial value to the home. Remember that tax is assessed based on the value of the entire property, including the yard and garden space.


do home improvements increase property taxes

How Do I Avoid Property Tax Increase in California?

If there are certain structural changes or home improvement projects that you would like to get started with and don’t want them to increase your property taxes, there are some exemptions that you may be entitled to.

One example that could bring the cost of taxes down is for those who are self-employed with a business that operates from home, either partially or entirely. With this situation, you can deduct the cost of adding an office to the property. Unfortunately, employees working from home cannot count on the same benefit.

Another example is if you need to increase the property’s square footage for medical care reasons. This is a welcome relief for those looking after elderly family members who require additional space to house and care for them.

In such a situation, you can deduct the added value of your home for tax purposes. If you don’t qualify for either of these examples, then perhaps you stand to benefit from a reduction in your taxes by installing energy-efficient improvements.

Inflation Reduction Act California

Under California’s Inflation Reduction Act, you may qualify for a tax rebate if you have made one or more of the following energy-efficient improvements.

  • Doors and windows
  • HVAC installation
  • Insulation and sealing
  • Water heaters and heat pumps
  • Electrical outlets and panel updates
  • Solar panel installation

If you have made any qualifying improvements, you must report them for a new assessment and typically pay for any increase in taxes during the tax year in which they were completed. However, in the subsequent tax year, you may be eligible to apply for a tax credit under the Inflation Reduction Act, which could effectively reduce your taxes on these updates by 30%.

Citizen Exemptions

Many citizens are exempt from paying property taxes, depending on their situation. Those included in this are as follows:

  • Senior Citizens
  • Disabled Veterans
  • Non-Profit Organizations
  • Low-Income Households

If you fit one of these profiles and wish to improve the property, we recommend reaching out to your local authorities to find out how it will affect your tax bill. Exemption from property taxes has financial limits that home improvement projects can exceed.

How Much Can California Property Taxes Go Up Per Year?

The amount by which your property taxes could increase per year depends on a number of factors related to Proposition 13. After the enactment of Proposition 13, the property taxes in California were calculated based on the home values of 1975.

Even today, if a property in California has not been sold, improved, or given square footage since the implementation of this measure, it will continue to be taxed based on its base year value from 1975. In California, when a property undergoes new construction work, the value of the improvements is based on current market values.

The decision to reassess the property depends on the scale of the renovations. Two other factors to consider are new/substantially new construction and additions/renovations. Most property owners can expect a maximum of a 1% increase in appraised value and an increase capped at 2% in a single year.


If you are looking to break ground on home improvements, it is worth keeping an eye on what kind of tax increase you could see. Additionally, be sure to check whether you qualify for any tax credits that can help reduce the tax hike. Always report any work to the authorities to see if a reassessment is required, and if you have any doubts, be sure to speak directly with tax specialists who can support you.