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Building tips for LOOOOOOOOOWWWW Property Taxes

Michael Payne
December 3, 2018
last modified: December 3, 2018

Hi, we are building a house on our land over the next few months and I am trying to build in way that saves us significantly on property taxes. We are doing EVERYTHING except the power company tie in. I just finished clearing the building site, installing water lines, temp pole, and the septic system. We only have one child left at home and want to make upkeep, utilities, taxes, cleaning all minimal. We are recycling and freecycling many things. I have already collected for free very nice cabinetry, double pane windows, interior doors, and light fixtures, etc... Anyways, we will build cheap, but we also plan to build a tight, well insulated , single story, wheel chair friendly plan. We are planning a one bedroom and office or two bedroom. The 2nd room will serve as my daughters room until the day she leaves our home.

Since we have no plans to build another house ever, unless our wealth became so significant that we "packed up the bags and moved to Beverly". That means, I do not want to build for resale value even if it is a hit on future wealth, I am building for a stay until the grave. Of course, if the difference is a $900 tax bill instead of a $1200 bill, I don't think it worth it to sacrifice the aesthetic enjoyment of a handsome yard. Our fledgling business and my Life insurance will have to be the wealth maker for my family.

Ideas I have had mulling around in my head:

1. Buy a double-wide and turn it into a bonified house on a steel frame. Keep the outside original plane jane, but 2x6, sheetrock, etc.. Tax man sees a doublewide, we live in a house.

2. Build a 2000sq ft barndominium where I use about 800ft for the house and 1200 for our business.

3. Build a small ranch house (800-1000sq ft) and build a shop adjacent.

4. Utilize lesser outside visual materials such as metal siding.

5. Don't do any fancy landscaping.

6. Don't do any decorative things such as crown moulding, etc.. until after final inspection.

7. Make a carport with a simple lean too rather than extend gable roof shape.

8. Put business in shipping containers or cargo trailers so they are not part of property.

Particulars of our county regulations:

1. Requires permit/inspections for house

2.Shop building does not require permit or inspection unless it contains living quarters.

3. Home improvements require no permit or inspection unless they include adding roof covered living space.

4. Singlewides are not allowed in our county.

I am trying to get a sense of how to evaluate this approach, improve it, or abandon it?

I don't see a rule book that the county will utilize and I know any rule book will be partially - subjectively applied as a nice "looking" house appears more valuable than a less aesthetic design.

Any advice, or understanding you can offer as I seek to render to Ceasar as little as I legally

VERY much appreciated.

-Mike

Comments (21)
  • annied75
    I used to sit on the Board of Review for my local township. The board listened to residents disputing their property tax values. In my area, it didn't matter how much money you saved by upcycling, landscaping, etc. It basically was assessed by square footage and other property values in your area. There was an increase to a house value due to wood floors vs carpeting, etc.

    I remember one resident that built a house. It was assessed at a value of $350,000. She disputed the value claiming that her and her husband only spent $250,000 on building the house, since they did the majority of the interior on their own. It didn't matter -- square footage and her neighbors' property values deemed that it was worth $350,000.

    My advice if you are looking for low property taxes -- buy an existing home.
  • bry911

    Where are you located? Without that the question is largely academic.

  • Michael Payne

    Middle Tennessee

  • just_janni

    I don't believe that your area (as a whole) has ever been called out as particularly high RE tax area. How much annual savings are we really talking about here?

    What are your current taxes on the land?

    If you are talking about 1000 or so square feet - maybe at about $150K at new build pricing for modest fitments - what tax bill would that equate to?

    Each county can be different, I believe. Do they assess on real estate transactions, comparables or what other method? How often is there a reassessment? (I think here it's 7 years)?

    It seems like a weird goal. Understand wanting to minimize your future expenses, but at what sacrifices? Could you get better return focusing on lower operating costs for electric / utilities and solar?

  • Michael Payne

    I am not sure how frequent reassessment is, but for me this is not germane to the topic because they will come. I have no idea what I can expect to save, but I am on a trajectory to find that out soon. It is certainly not a common goal. Perhaps the taxes will not jump significantly, but there have been municipalities which doubled taxes at the blink of an eye in their piratical zeal for plunder. I am looking ahead and if my pursuit of this information concludes with nothing significant of benefit, I will abandon it, but, if I can minimize the plunder of our small piggy bank, I will. I do like your idea of trying to cut back on other expenses. I thought and a solar water heater seems like a very simple technology and would be very cost effective and I have set that as a post construction improvement that might save several hundred a year. I will make a tight envelope, insulate well, use very high efficiency heat pump mini split(s), etc.. Currently the taxes are about $450 I think (34 Acres). Of course, that will all change when the house and shop are built. When I moved to Arkansas in 2007, our property taxes were $56 (44acres) and when I sold in 2017 they were up to about $1500. The nicer I made it, the more improvements, the more rent I was charged. I know this is laughable to some folks who are paying $10s of thousands, but, I am intent to do what I can. If I can mitigate $500 a year, that is $500 available to serve other means. Anyways, while I was hoping for some building techniques or ideas that would be more toward the build, the responses have been very helpful to make me think. Had I made better decisions economically and professionally in life I would not worry about saving several hundred dollars. But I am trying to evaluate my options for keeping back as much as I can and still have a comfortable existence well within my meager means. -Mike

  • dan1888

    Take a look at this thread on small homes.

    https://www.houzz.com/discussions/5553862/im-drawn-to-a-smaller-house#n=55

    Take that plan or similar and ask for a potential tax bill for it. If that amount fits your future plans you can construct a shop attached to it of whatever size you want for your business and whatever you need space for.

    The YouTube channel RR Building will show you how to construct the shop space. Here. You don't need any permits for the shop.

  • Michael Payne

    Thank you! I was at this site earlier this evening.

  • bpath Oh Sophie

    Around here it's pretty much just square footage and number of bathrooms. I don't think they care much whether you have crown moldings or not. Oh, and also around here, if part of your living space is below grade (not necessarily basement, but split-level), that lowers your tax assessment.

  • aviastar 7A Virginia

    You’re going to need to ask this hyper locally, I think. Outside appearance has very little to do with it around here and reassessments are mostly done based on square footage- they don’t even see the house, it’s just a formula on paper done in a database. Special reassessments may be done if you’ve filed building permits for significant additions, etc, but mostly it’s just standard yearly increases across the board. If that’s also the case where you live you could possibly play the game of what is defined as finished square footage; spaces you use as a bedroom that don’t technically count as one or unfinished shop or basement space, etc. Not for tax reasons, but we added sheds this year, yes plural, because the county had an arbitrary size limit that bumped you up into higher permits and codes. So we put in two smaller sheds side by side and got the same square footage we wanted without the extra hassle.

  • MountainView

    I'm assuming you will have homeowner's insurance (but that may be a bad assumption on my part) but I would think some of the things your are talking about would affect your insurance bill also, so you might want to factor that in.

  • B Carey

    I would recommend stopping into your zoning/appraisers office and chatting with them. They are usually very open and honest about these things. Ask the appraiser for the assessed value difference on a 1400 sq ft doublewide versus a 1400 sq ft stick built (or whatever) home.

    Your land is probably at the lowest assessment of ag right now. In my area, if you don't farm the land or have cattle/etc, you will loose the ag rating. Ag values jumped in our area 2 years ago and house values dropped. The assessors office indicated that they go back and forth on which values increase and which decrease. I have a 21 acre section that I can build on, which is cut into 2 parcels. The house will be on the 13 acre parcel. The 1st acre gets assessed higher (15,000?) the 2-4 next acres get a step down from that. And acres 5-10 get another step down. The 11-20 get a different assessment. All the amounts are higher than the current ag assessment. However, I want to put our 1600 sq ft (main floor) barn on the 8 acre parcel. Our county says we can pretty much add as many buildings as we want if our parcel is a minimum of 20 acres. The 8 acres will also have the chicken houses and garden building. We can't put a shop on an 8 acre parcel without having a house permit issued within a certain timeframe for the same parcel. So I will have to combine the 2 parcels when we get started on the barn. Depending on your acreage layout, and how many parcels you have, this may also be considerations of yours. If you have a new 34 acre parcel that is not subdivided, you may find that it can't be subdivided any further. In which case, the zoning or assessors office can calculate what your base assessment on the land will be. You can find all this out today by a visit or phone call.

    I understand wanting to minimize taxes. But if there is a quality of life tradeoff, that should also be considered. Everything else being equal, I would not build a doublewide home over a stick built home to save $300 in taxes per year. I would assume that a doublewide can't get me the insulation that a home built by other high-quality (not low end "builder's grade") can save me more than the difference of the tax assessment annually. I am going to assume that either way, you are building to minimize your annual expenses. And also actively work to minimize other expenses during the year. Maybe you are also able to earn money from your land.

  • rrah

    When we built our house the county appraiser came out to assess near the end of the build. It would not have mattered if we had used less expensive materials outside or delayed landscaping. The appraiser was walking through the house. In the long term it wasn't worth it to use less expensive materials inside only to rip them out later. Any tax savings would have been used up by installing materials only to rip them out and replace them. Your area may differ.

  • chicagoans

    You'd probably faint if you saw my taxes, but on the plus side I just successfully disputed an increase and did a bunch of research and calculations to do so. As mentioned above, around here they don't care about landscaping, crown molding, what your appliances are, etc. It's mostly about square footage on the land and square footage on the home. They also keep track of the age of the home (older homes are in a different multiplier, depending on how old), number of bathrooms, and I know they track construction type (frame, brick) but not sure how much that matters. In this area the lion's share of our tax dollars goes to the schools, which are excellent and why our taxes are high. They're also high because we have a tiny downtown area with not much sales tax revenue to offset residential taxes. If you already have your land, those things will not be anything you can choose, but it's worth knowing where your tax dollars go in case you want to get involved in local planning / zoning / government etc.

    Look up your parcel and nearby parcels on your local tax assessor site; you should be able to find where the $ go.

  • bry911

    I am not sure how frequent reassessment is, but for me this is not germane to the topic because they will come. I have no idea what I can expect to save, but I am on a trajectory to find that out soon. It is certainly not a common goal.

    Sometimes when you wonder into territory that most people don't, you are trailblazing and other times you are just lost. In this case, I suspect you are very probably lost. The reason this is not a common goal is that the math just doesn't work out for most people.

    Simply spending less money is a great idea, and so is keeping maintenance and upkeep in mind. However, in the end, if your drive towards ad valorem savings accelerates maintenance, or leads to non-standard material you will probably spend more than the savings themselves are worth.

    The actual value of a dollar of annual tax savings is something between $9 and $11. So $500 of annual tax savings which is probably about $70,000 of home devaluation in middle Tennessee is worth between $4,500 and $5,500 of cash outlay during the build. Also since the value is only $4,500 to $5,500 almost any accelerated maintenance because of this plan wipes out the savings.

    ----

    My personal advice is build smart, modest, and standard, then the net savings will be better than any tax savings. I am of the opinion that the words, "I have a great idea that you haven't seen before" never go with the words, "and it will save a ton of money."

    Just my 2 cents...

  • PRO
    Virgil Carter Fine Art

    Probably the best strategy for the OP, as noted above, is simply to have a discussion with the local tax assessor to determine the methods used for residential assessments. Since these methods vary widely, there's little point in posting here.

    I find myself in rare agreement with bry911. There is short term expense and long term expense. Said differently, you can pay me now or you can pay me later...

  • Mrs Pete

    I own a small farm, and about 90% of my taxes are deferred. Why? Because we actively farm the land, and our county is trying to maintain family farms -- so they incentivize it through taxes. It's also possible to do this by creating /maintaining a forestry plan.

    Notes:

    - Obtaining such a tax deference is not easy -- lots of hoops through which to jump -- but once you have it, it's easy to keep. Your first stop is the tax office in your county.

    - We have more land than you do. I don't know how much it takes to qualify for such a program -- even if I did know, it might be different in your area.

    - Our taxes on the land are deferred -- not the taxes on the house.

    - Our farm profits vary widely from year to year, but they always-always cover the taxes -- and then some.

    - This is essential: Our taxes are deferred, not forgiven. If we were to stop farming, or if we were to divide the land in such a way that we dipped below the minimum number of acres, we would instantly owe FIVE YEARS WORTH of the deferred taxes.

    - You can also get a Farm Truck tag for your vehicle, which is cheaper than a regular tag.

    My personal advice is build smart, modest, and standard, then the net savings will be better than any tax savings.

    I'm with you on this. I understand the idea of wanting to minimize taxes, but our tax bill really isn't all that high anyway. If I were paying full taxes on my farm and the house, it'd still be less than $4000/year.

  • ShadyWillowFarm
    You need to live in this place. Build a nice efficient house that you like and just put a bit of money aside in case your taxes go up.
  • jmm1837

    The consensus seems to be, don't make the classic mistake of being "penny wise and pound foolish." In other words, don't cheap out to save a few short term dollars on tax, and end up with more long-term costs in on-going maintenance and replacement. And don't think of tax as "rent' - think of it as fee for service, whatever that may be in your area. In mine, taxes go to schools, garbage collection, road maintenance, street lighting, sewage, etc etc. All things worth paying for.

  • shead

    Where, exactly, in Middle Tennessee? That's the big question. Just moved from there to southern KY about 2 hours away with majority of family still in Davidson/ Williamson County. Davidson County rates are HORRENDOUS! We were Williamson and didn't think they were too bad overall for the value of our home. Phenomenal school districts to boot. We were there 8 years and only got reassessed once in that time. It's not going to matter what exactly you spend because the land value/local comps are going to be the biggest determiner in any county surrounding Metro Nashville. Don't cheap out on the house you are going to die in to save a few bucks a year.

  • seabornman

    One method that avoid taxes that I see done all the time: build unheated, unfinished space, then, after you get your final CO and assessment, finish it out. Usually done with walk-out basements, extra garage space or large attic spaces. Needless to say, you don't get a permit for that work. You can also build small then add to it later on, dragging out the construction. It takes a few years for the assessor to catch up, especially if you don't get a final CO for a while.

  • rwiegand

    1) Location, location, location. Build someplace with a large commercial/industrial base, not many kids in school, few to no public services, and differential tax rates that favor homeowners vs commercial space. Building in a really crappy neighborhood also helps, so the comps are low.

    2) Build small. Square footage is, by far, the primary determinant of assessment.

    Finish and construction quality makes little to no difference unless you are way out of character for your neighborhood.

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