Realizing how your Property Tax Bill will be affected by your new Accessory Dwelling Unit is very important when running the numbers.
There is not much online discussing how your property taxes are re-assessed so we called up the Contra Costa County Tax Assessor’s office to get some clarification, and here is what we found out.
An ADU is considered “new construction” and therefore does trigger a re-assessment. However, the county will only reassess the added “new construction” which is added to your property tax basis.
Current Property Tax Basis: $600,000
Current Property Tax Bill: $600,000 x 1.3% = $7,800/year
Value of Newly Constructed ADU: $150,000 (based off market construction cost or comparables)
Total New Property Tax Basis: $750,000
New Property Tax Bill: $750,000 x 1.3% = $9,750/year
Increase in Property Taxes: $1,950/year
It is advised that you carefully document the costs of the ADU in the event the Assessor increases your home value more than it actually cost you to build it. You will get a notice in the mail once your property taxes are re-assessed. It can take anywhere from 1 to 18 months to receive the notice in the mail from the County Tax Assessor. You are typically given 30-45 days to dispute the re-assessment. That is the period of time that you can bring up your actual costs to dispute the re-assessment.
You can get an idea of what the State uses for construction costs by looking up the State Board Constructions Cost Schedule AH53. The State Board of Equalization also has a good FAQ.