Are you thinking about selling your property or starting a construction project soon? Hold on! Did you know you might have to pay a hefty tax called “Property Improvement Tax” (“Hetel Hashbacha”)? This tax can take away nearly half of the increased value of your property! Sounds scary, right? Don’t worry—today, we’re sharing secret tips on how to lower this tax significantly.
First Things First: What’s Property Improvement Tax?
In simple terms, this tax is charged by your local municipality when your property’s value goes up because the city approved new building rights or zoning changes. Basically, if your property is suddenly worth more because the city allowed new developments, they want a cut of that extra value.
Quick Example:
- Your property was worth around $200,000.
- The city approved new zoning laws or building rights.
- Now your property’s worth around $300,000.
- The tax applies to the extra $100,000 gained, potentially costing you tens of thousands!
Crucial Mistake to Avoid Before Selling
Here’s an important tip: never sign a sale contract before receiving your tax assessment. Why?
When you sell your property, the tax assessor uses your selling price to calculate the tax you owe. If your selling price is high (which it often is), your tax will be high too.
But what if you get the tax assessment before selling? In this case, the tax assessor doesn’t have an exact selling price yet and usually estimates lower, saving you lots of money. Even if you later sell for a higher price, the original lower assessment stays in place.
Easy Steps to Do This:
- Contact your local municipality.
- Request a property improvement tax assessment (free and obligation-free).
- Receive your assessment within roughly three months.
Building a Project? Get Assessed Early!
If you’re planning a new construction project, it’s smart to ask for a tax assessment before submitting detailed building plans. Why?
When you submit detailed plans, the assessor sees exactly how your project increases property value. This often results in higher, more precise taxes because they consider every little detail—luxury rooftop apartments, nice garden spaces, spacious balconies, or a fantastic view.
But if you ask for an early assessment before detailed planning, the assessor provides a more general and usually lower estimate. Once approved, this lower amount sticks, even if your final project ends up increasing the property’s value more.
Another Key Tip: Solve Ownership Issues Later
Does your property have tricky ownership problems—like protected tenants or multiple owners without clear agreements? Good news: those issues can lower your property’s value and thus reduce your taxes.
But here’s the catch: fixing these problems too soon (before the tax assessment) removes your advantage. The tax assessor will then value your property higher because there are no longer any issues.
Smart Steps to Follow:
- Identify any ownership or tenant issues.
- Work informally to solve these problems without signing any official agreements.
- Officially resolve these issues only after you get a low tax assessment.
Final Thoughts and Quick Recap (Too Long; Didn’t Read):
- Always request a tax assessment before signing a sale contract.
- Get an early general assessment before detailed construction plans.
- Delay resolving property ownership issues until after the assessment.
- Consult a professional property appraiser early to save money.
Being smart and planning ahead can dramatically lower your property improvement taxes, saving you a small fortune. Now, you’re ready to handle property improvement taxes like a pro!
