December 8, 2021
When it comes to calculating the total cost of adding a new addition to a home or property for your out-of-home business, you do not want to overlook the additional potential costs related to the project. Most are aware of the exemplary cost of adding a new addition or converting a space, such as construction costs, zoning and permit fees, debris and waste removal, supplies, and labor. These standard costs are usually all there is for a small or moderate home office addition, but for larger business-purpose remodeling projects, there is more than what meets the eye.
Continue reading to learn about the hidden costs after completing a home office property addition or conversion for your work-from-home business, including the potential tax increases you may be subjected to as a result.
Once a building inspection department signs off on a home office addition after it is complete, the property tax assessor may re-evaluate the home’s worth to determine if more taxes should be paid annually for it. Large home addition projects most often increase a property’s value, subsequently moving homeowners into a different tax bracket. Increased home value means increased property taxes, plain and simple.
The degree to which these property taxes increase is based on the increase of the home’s value. Along with increased property taxes, homeowners’ insurance costs increase as well. These are unforeseen but potential costs that should be added into a homeowner’s remodeling budget in terms of large-scale additions and space conversion.
Examples of large-scale additions include adding a spacious deck or patio to a home or property, adding another level or story, building a guest house, and more. You will also want to ask about any possible tax breaks on residential energy property credit or available tax credits and rebates if you remodel your home.
It is encouraged to contact your homeowner’s insurance carrier once a large-scale home remodeling project is finished in order to discuss adding additional insurance coverage to your existing policy for fire damage and other structural damages for this area. By neglecting this duty, your new home office addition or conversion may not be covered under your policy. They will determine how much coverage the space needs based on the overall cost of the project.
Are you having trouble understanding or managing your business taxes as a work-from-home company? Contact Aspire CPAs, PC at 317-469-4500 to speak with a licensed accountant who specializes in business tax planning and preparation in Indianapolis, Indiana. You may also request an appointment, online.
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