ADU and Taxes

We specialize in the design and permitting of ADU’s and home additions/remodeling. To learn more about our services, contact us at ortnerdesign@gmail.com

Many of our clients who want to convert an existing garage or build a new ADU are fearful that their property taxes will go up significantly. Although we are not experts on the subject (and you should always consult your own tax advisor), below is some information to consider.

Adding a second unit will affect property taxes. A primary house will not be reassessed and property taxes will only increase based on the added value of the second unit. If you have low property taxes because you have owned your home for many years, your base assessment will not be affected. The assessor will only review the value of the improvement.

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A second unit will likely add to the home’s value, though the exact amount is difficult to predict because there are few comparable homes and market fluctuations.

Adding a second unit may impact income taxes, as well. This can be rather complicated and it’s best to discuss with a tax advisor. The rental income received from your second unit is taxable, but you can depreciate the cost of construction and maintenance, which can often reduce your taxes overall. There may also be capital gains tax related to the increased value when the property sells.

As with any tax issue, it is always best to speak to your professional advisor.