Which Home Improvements Raise Property Taxes in Texas?

Which Home Improvements Raise Property Taxes in Texas?

Any home improvement that adds market value beyond routine maintenance can increase your Texas property taxes. Under the Texas Tax Code, appraisal districts must value your property at market value as of January 1 each year — and improvements that add livable space, functionality, or desirability raise that value.

Here's the key rule: improvements (projects that add value) are taxable. Maintenance (projects that preserve existing value) is not. The sections below break down the most common home projects and their tax consequences.

Projects That Typically Increase Property Taxes

Room Additions and Square Footage

Adding livable square footage is the single biggest driver of property tax increases. This includes:

• Room additions (bedrooms, bathrooms, living areas)
• Second-story additions
• Enclosed patios or porches converted to living space
• Finished basements (rare in Texas but applicable)

Estimated tax impact: Appraisal districts typically value added square footage at a per-square-foot rate consistent with your home's existing quality level. A 400 sq ft addition at $150/sq ft adds $60,000 to your appraised value. At a 2.5% tax rate, that's $1,500/year in additional property taxes.

Swimming Pools

Does a pool raise property taxes in Texas? Yes. An in-ground pool is considered an improvement that increases market value. However, pools don't add dollar-for-dollar value — most appraisals assign a fraction of the construction cost.

• In-ground pool: Typically adds $15,000–$40,000 to appraised value depending on size and features
• Above-ground pool: Generally does not affect property taxes (considered personal property, not a permanent improvement)
• Pool house or cabana: Adds value as an additional structure

Pools can actually decrease value for some buyer segments (families with small children, maintenance-averse buyers). If your appraisal increases more than the pool's market contribution, you have grounds to protest.

ADUs and Garage Apartments

Accessory dwelling units (ADUs), garage apartments, and casitas are increasingly popular in Texas metros like Austin, Houston, and San Antonio. They have significant tax implications:

• New detached ADU: Treated as a new structure. Appraised at full construction value.
• Garage conversion to living space: Increases value by converting non-livable to livable square footage.
• Above-garage apartment: Adds both the structure value and livable square footage.

Some Texas cities have recently relaxed ADU zoning rules, but zoning approval doesn't exempt you from property tax consequences. The appraisal district will add the ADU's value to your property assessment.

Garage Conversions

Converting an attached garage to living space (home office, extra bedroom, game room) increases your livable square footage on paper. Appraisal districts will reclassify that area from garage to living space at a higher per-square-foot value.

However, you also lose the garage value — so the net increase is typically the difference between garage and living space rates, not the full living space value.

Kitchen and Bathroom Remodels

This is where the line between "improvement" and "maintenance" gets blurry:

• Full gut renovation with layout changes: Likely increases value. New cabinetry, countertops, fixtures, and reconfigured plumbing signals a quality upgrade.
• Like-for-like replacement: Replacing old countertops with new countertops of similar quality is closer to maintenance.
• High-end upgrades: Installing commercial-grade appliances, custom cabinetry, or luxury finishes in a mid-range home is clearly an improvement.

Practical reality: Interior remodels are harder for appraisal districts to detect unless you pull permits or the changes show up in MLS photos when you refinance or sell.

Outbuildings, Barns, and Workshops

Detached structures are appraised separately from your home:

• Metal workshops or barns: Valued based on size, construction quality, and whether they have utilities (electric, plumbing, HVAC)
• Storage sheds under 120 sq ft: Many jurisdictions don't require permits, and appraisal districts may not add value for small sheds
• Large outbuildings with utilities: Treated as additional structures with full assessments

Fencing

Standard residential fencing (wood privacy fence, chain link) generally has minimal impact on property taxes. Most appraisal districts don't add significant value for basic fencing.

Exceptions: Ornamental iron fencing, masonry walls, or extensive fencing on large lots may be noted and valued.

Decks, Patios, and Outdoor Living

• Uncovered patio or basic deck: Minimal tax impact
• Covered patio with outdoor kitchen: Can add $10,000–$25,000+ to appraised value
• Pergolas and shade structures: Usually minimal impact unless they're permanent, high-value structures

Projects That Usually Don't Increase Property Taxes

These are considered maintenance — they preserve your home's existing value rather than adding new value:

• Roof replacement (same material and quality)
• HVAC replacement
• Plumbing repairs or re-piping
• Electrical panel upgrades
• Foundation repair
• Exterior painting
• Window replacement (same size and type)
• Water heater replacement
• Driveway repaving (same material)
• Siding replacement (same material and quality)

The rule of thumb: If you're replacing something old with something equivalent, it's maintenance. If you're adding something new or upgrading quality significantly, it's an improvement.

Solar Panels: A Special Case

Solar panels are unique under Texas law. Texas Tax Code Section 11.27 provides a property tax exemption for solar energy devices installed on your property. This means:

• The value added by solar panels is exempt from property taxes
• You must own the system (leased panels don't qualify)
• You must file Form 50-123 with your county appraisal district by April 30
• The exemption covers the increased property value, not the panels themselves

Solar panels won't raise your property taxes if you file the exemption correctly. But if you forget to file, the appraisal district may add the value to your assessment.

How Does the Appraisal District Find Out About Improvements?

Many homeowners wonder how the county appraisal district discovers home improvements. They use several methods:

Building Permits

This is the primary method. When you pull a permit from your city or county, that information becomes a public record. Appraisal districts regularly receive permit data and cross-reference it with property records. The permit typically includes the scope of work and estimated cost, giving the CAD a starting point for revaluation.

Aerial and Satellite Imagery

Texas appraisal districts increasingly use aerial photography and satellite imagery to detect changes. They compare images year-over-year to identify:

• New structures (pools, ADUs, outbuildings)
• Additions to existing footprints
• New driveways or hardscaping

Some districts contract with companies that fly aerial surveys annually, while others use commercially available satellite data.

MLS Listings and Real Estate Photos

When you list your home for sale or it appears in MLS data (even for refinancing comps), interior and exterior photos become available. Appraisal districts can compare these photos to their existing records to identify improvements.

Other Methods

Appraisal districts may also learn about improvements through routine drive-by inspections or data from utility companies showing increased usage (suggesting added square footage).

Unpermitted Work

Doing work without permits doesn't hide it from the appraisal district. Aerial imagery, real estate photos, and field inspections can all reveal unpermitted improvements. If the CAD discovers unpermitted work, they'll add the value to your assessment regardless of permit status.

Additionally, unpermitted work creates other risks: code violations, insurance issues, and complications when selling your home. Getting proper permits is always the better approach.

How Improvements Affect the Homestead Cap

If you have a homestead exemption, the 10% annual cap on assessed value increases normally protects you from sharp tax hikes. However, new improvements are an exception to the cap.

Under Texas Tax Code Section 23.23:

• The value of new improvements is added on top of your capped assessed value
• The 10% cap still applies to the non-improvement portion of your value
• The senior tax freeze (over-65) is also adjusted upward for new improvements

Example:

• 2025 assessed value: $400,000
• 10% cap for 2026: $440,000
• Value of new pool added: $30,000
• 2026 assessed value: $440,000 + $30,000 = $470,000

Learn more about how the homestead cap works.

How to Protest After a Home Improvement Increases Your Taxes

If your appraisal district raises your assessed value after a home improvement, you have the right to protest. Here's when a protest makes sense:

• The increase exceeds the actual market value added — A $50,000 pool doesn't necessarily add $50,000 to your home's sale price
• The CAD overestimated the improvement — Their records may show incorrect square footage or quality
• Comparable homes with similar improvements sold for less — Market data trumps cost estimates

Evidence to Gather

• Construction invoices showing actual cost (cost does not equal value, but it's a data point)
• Comparable sales of homes with and without similar improvements
• Photos showing the actual scope of work vs. what the CAD has on record
• An independent appraisal if the discrepancy is large

Filing a property tax protest is free and cannot result in your value going higher. The worst outcome is that your value stays the same.

Quick Reference: Home Projects and Tax Impact

Plan Before You Build

Before starting a major home improvement project in Texas, consider:

1. Budget for higher taxes — Estimate the tax impact before you start
2. File your homestead exemption first — Make sure you have the 10% cap protection
3. Understand the permit implications — Know that permits trigger CAD review
4. Keep records — Save invoices and photos for potential protest evidence
5. Protest if overvalued — Don't accept an inflated assessment without challenging it

Get Help With Your Property Tax Protest

If a home improvement project has increased your property taxes more than expected, Ballard Property Tax Protest can help. We gather evidence, file your protest, and represent you at hearings — and you only pay if we reduce your value.

No reduction, no fee. Sign up today.