PHYSICAL IMPROVEMENT EXEMPTION

Homeowners who are planning to make physical improvements to their home may be eligible for a physical improvement exemption to their single family dwelling. This exemption would entitle you to an exemption on a portion of your property taxes.  The application can be downloaded HERE.

For the purposes of this program, the term “physical improvement” means any addition, improvement, remodel, renovation, or structural enhancement that materially adds to the value of an existing single family dwelling. It is an actual, material, and permanent change that increases the value of the dwelling. The term also includes the addition of a garage, carport, patio, or other improvement to the dwelling that materially adds value. This does not include swimming pools, outbuildings, fences, landscaping, barns, sheds, or shops. “Physical Improvement” does not include repairs to or deferred maintenance of a dwelling.

For the purposes of this program a “single family dwelling”, means a structure maintained and used as a residential dwelling that is designed exclusively for occupancy by one family. A manufactured home, mobile home, or park model trailer will be considered a “single family dwelling” virtue of its being permanently fixed in location upon land owned or leased by the owner of the manufactured home, mobile home, or park model trailer and placed on a foundation (posts or blocks) with fixed pipe connections with sewer, water, or other utilities.

TAXPAYER OBLIGATIONS

Physical improvements to a single family dwelling upon real property are exempt from property tax for three assessment years after the improvements are completed. The amount of the exemption is the difference between the true and fair value of the dwelling before and after the physical improvement. However, the amount of the exemption cannot exceed 30% of the true and fair value of the dwelling prior to the improvements.

The following conditions must be met to receive this exemption:

THE FOLLOWING EXAMPLE SHOWS HOW ELIGIBILITY REQUIREMENTS FOR THIS EXEMPTION WILL BE APPLIED. THE EXAMPLE SHOULD BE U SED ONLY AS A GENERAL GUIDE AND CANNOT BE RELIED UPON FOR ANY OTHER PURPOSE.

The addition of a garage or carport to a single family dwelling may qualify for exemption because it may increase the value of and is compatible with the existing residential dwelling. Conversely, the construction of a swimming pool, shed, barn, or shop, which are not commonly attached to a dwelling, does not qualify for the exemption; even though the construction of such a structure may increase the value of the parcel as a whole.

ASSESSOR’S DUTIES

Upon receipt of a taxpayer’s claim for exemption, the Assessor shall determine the true and fair value of the unimproved dwelling. This value may be determined by means of a physical inspection and appraisal or a statistical update of the value shown on the county’s current assessment roll.

After receiving the notice of completion from the taxpayer, the Assessor shall revalue the improved dwelling by means of a physical inspection to determine the amount of the exemption.

AMOUNT OF EXEMPTION

The amount of the exemption is the difference between the dwelling’s true and fair value before and after improvements, but this amount cannot exceed 30% of the true and fair value of the original unimproved dwelling. In other words, the amount of the exemption is determined by subtracting the true and fair value of the unimproved dwelling from the true and fair value of the dwelling including improvements. The cost of the physical improvements is not the basis for the exemption granted under the Revised Code of Washington 84.36.400 and, as a result, the exemption granted is not normally equivalent to the costs incurred by the taxpayer.

The amount of the exemption shall be deducted from the assessed value of the improved dwelling for the three assessment years immediately following completion of the improvement.

The dwelling must at all times be a “single family dwelling”. If the Assessor determines the dwelling does not meet the definition for a “single family dwelling”, the exemption will be denied or canceled.

When an exemption has been granted and placed on the assessment rolls, the exemption will continue for the three year exemption period even if the single family dwelling is sold. The exemption pertains to the dwelling and is not personal to the individual property owner.


THE EXAMPLE BELOW SHOULD BE USED ONLY AS A GENERAL GUIDE IN CALCULATING A PHYSICAL IMPROVEMENT EXEMPTION AND CANNOT BE RELIED UPON FOR ANY OTHER PURPOSE

In 2007, Taxpayer A completed the addition of a family room and the renovation of the kitchen. These improvements cost the taxpayer $60,000. (As the following example will show, the cost of the improvements is not the basis of the amount of the exemption.)

The difference between the value of the improved dwelling and the value of the unimproved dwelling ($50,000) or 30% of the unimproved dwelling ($150,000 x 30% = $45,000), whichever is less.

The assessed value of the improved dwelling will be reduced by $45,000 for the next three assessment years (2008, 2009, and 2010).

LIMITATION

This exemption may not be claimed on the same dwelling more than once in a five-year period. This five year period begins the first year the exemption appears on the county assessment rolls.

RELATIONSHIP TO REVALUATION CYCLE

84.40.400 of the Revised Code of Washington requires each county to establish and maintain a systematic program to revalue all taxable property within the county at least once every six years.

Because Grays Harbor County is on a four year revaluation cycle and revalues all taxable property within the county once every four years, the dwelling may be revalued during the three assessment years the exemption is in effect in accordance with Grays Harbor County’s scheduled revaluation plan. The revaluation program will proceed as usual, but the amount of the exemption will remain unchanged.

RIGHT TO APPEAL

A taxpayer who applies for an exemption under 84.36.4100 of the Revised Code of Washington may file an appeal with the Grays Harbor County Board of Equalization under the following circumstances:

The information listed above can also be found within Washington’s Administrative Code - WAC 458-16-080.