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How Your ADU Affects Your Property Taxes

David Reyes
David Reyes

You want to build an ADU on your property, but you’re wondering about how it will impact your taxes. We understand – that’s why we’re here to help.

It’s no secret that property values in California have been increasing steadily for years. This is great news if you already own a home here, but it can be a major concern if you’re thinking of building an ADU. That’s why ADU.Works wants to help you navigate the process of adding an ADU to your property and make sure that you’re getting the most value for your money.

Tax Assessment

Building an ADU can be a great way to add some extra living space or income, but you don’t want it to cause a spike in your property taxes. Fortunately, you don’t have to worry about that. Building an ADU will not cause your primary home to be reassessed in value. The ADU will be assessed independently as an addition to your current property with approximately 1% of that assessment added to your existing property tax bill. 

In simpler terms, Prop 13 will not be triggered by building an ADU, and your existing home will not be reassessed. You will be getting an additional assessment on top of the one for your primary house. This is known as ‘blended assessments’.

Here’s an example:

If you were to build an ADU that is assessed at a value of $140,000. Your new property tax bill will be roughly 1% or about $1,400 per year on top of your existing home. So in this situation, your taxes go up by just under 120 dollars every month.

Effectivity Date

When a new structure is built, the owner of that property must notify their County Assessor’s Office. When the reassessment for construction has been completed, they will send out notice in writing with an updated assessment reflecting all changes from there on the next regular tax bill which can take up to one year before it becomes active.

The California state law also requires the assessor’s office to appraise all new construction on January 1st in order determine a property’s taxable value for tax purposes. That figure is then reflected on your next regular billing cycle.

Conclusion

There are many reasons why people decide to add extra dwelling units, or ADUs for short, in their primary residence. Some may use them as an apartment for family members who need more space than what’s available at home while others might invest by renting out these spaces which can generate additional income from rental properties across town – all without having any major modifications done on your house.

ADU.Works is an excellent choice for building an ADU. But in the same breath, we want to help you utilize your ADU wisely. Though we recommend that you consult with your accountant, we would also like to discuss this with you. We’re open to having a FREE 15-MIN Consultation Call with you or you can give us a quick call through our number +1 (650) 227 4810.

Let’s see how we can help. We look forward to hearing from you.

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