Does the installation of a custom home closet or shutters trigger re- assessment of property under prop. 13?
Is the interest on a HELOC loan used for the costs for installing a custom home closet or shutters allowed under AMT?
No building permit -> no reassessment.
Equity loans used to improve the secured property are not excluded from AMT.
More to the point, unless the square footage is increased there is no reassessment. This includes remodeling a bathroom, a kitchen or replacing a roof. Adding a block wall fence, pool or covered patio will also trigger a reassessment. The assessment will only be increased by the amount that the assessor believes that the improvement added the FMV
Line 4: Home Equity Interest: Home mortgage interest claimed as an itemized deduction is only deductible for the AMT if the loan was used to buy, build or improve your home. For regular tax purposes, interest on home equity mortgages up to $100,000 is deductible, even if the proceeds are used for personal purposes, such as buying a car or paying off credit card debt. So unless the home equity loan proceeds were used to improve your home, the interest is added back for AMT purposes.
Will converting a storage area into a bathroom trigger re-assessment? Someone in San Francisco told me that their property tax went up more than 2% after they did this. There were permits. The square footage of the house did not increase.
It depends - on whether the storage space was considered part of the living area (e.g. garages whether attached, under the house or detached are usually not considered part of the living area).
When I added a bedroom and bathroom and had the original construction declared historic (special tax considerations) I questioned the change in my assessment and the assessor took the time to run through the calculations with me. I discovered that the title change (I became joint with my new wife) had not been properly accounted for by the assessor.
I found the assessor's staff very helpful (probably because the assessor is an elected post).
While a potentially useful rule of thumb, there is no statute or regulation that says that. In fact a review of the regulations (in particular §18:463) indicate that reassessment is unrelated to building permits.
The regulations don't say that either. The regulations say that anything that is "substantial" (e.g. more than a repair) that changes the way the property is used can cause a reassessment. Change in square footage has nothing to do with it, as far as I can tell.
Certainly changing the square footage of property will necessarily cause a potential reassessment. But it's not the only criterion.
If you have any contrary authority I'd love to see it.
Yes, that's what it's all about.
Technically true, but without a building permit issued, the assessor isn't going to be aware of any potential change.
But what the assessor doesn't know isn't going to tax me! ;-)
That's like saying it's not illegal if you don't get caught. Many of those internal changes require a permit, though you may never get caught if you don't get one.
More relevant, I think, is that some of these changes just won't have much if any effect on the price of the property
Unless he finds out later, in which case it might cost you a whole lot more.
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However when you come to sell the buyer may find it difficult to obtain financing if there is a noticeable un-permitted change. In California un-permitted changes must be disclosed to the potential buyer if the seller or his realtor has knowledge of them. Certain localities may require permits for water heater, roof or heating/air conditioners replacements when it might be arguable that that what is being done is a major repair. The same could be true of window replacements. There also may be limits if the house is in a historic district.
Local authorities have forced the inspection of un-permitted changes including partial de-construction to allow the inspector access, upgrading to cost and/or the restoration to original conditions. The legal costs of fighting city hall can be quite high.
Can I cite instances - probably but I am too lazy to look them up.
Don't assume that your neighbors won't notify the assessor. Neighbors tend to get annoyed when THEIR assessments go up and yours doesn't, even though your property is similarly valued to theirs. I've personally made some notifications to our local assessor.
In California, doesn't everybody go up as fast as Prop 13 (the "Landlord Enrichment Act") allows?
Seth
That's precisely the issue being discussed: what does Prop 13 allow?
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