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Investopedia says that making your house look pretty is likely to cause an increase in taxes.

..more attractive homes often receive a higher assessed value than comparable houses that are less physically appealing.

Is the above claim true? If so, why? What logical explanations are there for such practice (in the places where it is practiced)?

  • Can you narrow this down to a specific area? As it stands, it's rather broad. One might be able to find a place where it is the case, but would that answer your question? – JJJ May 24 at 18:21
  • @JJJ US for one. I believe it's world wide (with exceptions of course). I didn't find references to specific areas in the investopedia article – Alex Doe May 24 at 19:06
  • @JJJ Yes, please find a place where "it" is the case. – Alex Doe May 25 at 5:16
  • @JJJ , theresawalrus , Glorfindel .. Can you please explain what part of the question is off topic? Thank you – Alex Doe May 26 at 15:18
  • I voted to close because it's rather broad. It's basically a race to find places where this is the case. And indeed, in many cases it could be by extension. For example, some place might have a window tax, you could then argue fewer windows means less beautiful so effectively it's a tax on beauty. – JJJ May 26 at 15:20
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Property taxes are generally based on the value of the house as determined by the tax assessor at the time that value is reassessed. Different places have different laws and rules that govern how the assessor determines the value of the house, but, as the article says, since the assessment is done by a human being, there will always be some subjectivity in the outcome.

The reason we the concept of "curb appeal" exists is that the market shows that houses that look nice and/or fancy sell for more than identical houses that are ugly or messy. So, it's logical that, unless there were laws or regulations that prevented this, a pretty looking house would be judged to be worth more than an ugly house – and, therefore, face a correspondingly higher tax bill when reassessed.

So, there's no "beauty tax" – it's just a side effect of pegging property taxes to value and the effect of "curb appeal" on property value

  • You are right. If we accept the "pegging the taxes to the value", then logically, prettier is more value, thus more tax. While that is true, it still sounds like a beauty tax to me with a different name :) – Alex Doe May 25 at 5:12
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    @Alex Doe: But it's not just a beauty tax. You could do things to a property that some people would think make it uglier - for instance, adding solar panels - that might increase its value. Or in the extreme case, most of us would think that an open meadow is more beautiful than a housing development, but guess which has the higher tax rate? – jamesqf May 26 at 18:33
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    @AlexDoe The key difference is that it’s neither targeted or deliberate. You pay more sales tax on a Fuji apple than a Red Delicious, but you wouldn’t say there’s a “Fuji Apple Tax” because the tax is based on price, not on the kind of apple. There are certainly serious issues with property taxes in many jurisdictions, but saying it represents a “Beauty Tax” is pretty absurd. – divibisan May 26 at 20:03
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I get an assessment from the county I live in every year, telling me what the state thinks my house is worth. I am then assessed a property tax based on that. If I made major improvements to the property, my taxes would also go up.

While that sounds counter-intuitive, it's not really a bad practice. Logically, taxes are based on the value of an item. Remember also that I can derive direct benefit as well. If I sell my house for more than I purchased it for and make a profit, I have obtained something I desired as well.

In most countries, however, there are typically tax benefits to owning a home. I get a reduced tax rate because I live in the home. In the US, if I lived in it 2 of the last 5 years (with a few restrictions), I pay no capital gains tax on any profits. The benefits favor my improvements far more than the property tax assessment.

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    The problem with pegging taxation to valuation is that the value can increase but the financial situation of the property owner may not have changed - this has happened a lot in the UK, where property prices have tripled, quadrupled and more. A house worth £20,000 in the 1980s could now be worth £800,000 in certain areas, but the owner might not be able to pay taxes on that value. It's hurting a lot of people. – Moo May 24 at 22:14
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    @Moo: That is why California voters enacted Proposition 13 en.wikipedia.org/wiki/1978_California_Proposition_13 and other US states have enacted similar measures. – jamesqf May 25 at 3:16
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    @Moo in the UK there are no automatic reassessments for council tax due to price increases. The council tax band is determined by the value of the house in 1991. If there have been significant changes to the house the band would be the value that the house would have been in 1991. House price variations don't feed into council tax bills. – James K May 25 at 5:31
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    How would the state know if you've made any improvements? Do you have to report them? – JonathanReez May 26 at 22:43
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    @JonathanReez No. Most states rely on reported sales in a given area to determine what prices are based on. There are tax assessors, however, who periodically visit the property to help ensure prices mesh with reality – Machavity May 26 at 23:02
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In general, tax assessors cannot go inside homes to evaluate them. So the only information that the tax assessor has relate to

  1. The value of the land.
  2. The value of the planned home (i.e. they can view the original plans).
  3. The value of the external home.
  4. The price history.

A side effect of this is that if you put a lot of money into the exterior of the home and very little money into the interior, you will have a higher assessment than someone who puts all their money into the interior and none in the exterior. Because the tax assessor will assume that you put money into the exterior and interior proportionately. So when they see a nice exterior, they assume a nice interior.

Another way to say this. There is no explicit tax on having a nice home exterior. But an implicit effect of having a nice home exterior is that the comparable houses will be more expensive.

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