That is the property-tax question, and it is separate from the permit fees and from the income tax on rent. This page is general information from the California Constitution, the Revenue and Taxation Code, and the State Board of Equalization, checked November 12, 2026. It is not tax advice or legal advice for your parcel. The county assessor sets the value. A tax professional is the person to ask about your bill and about rental income.
The assessor adds the new work, and leaves the rest alone
Article XIII A of the California Constitution, added by Proposition 13, is the frame. Section 1(a) caps the general ad valorem tax at 1 percent of full cash value. Section 1(b) lets counties add the rate needed for voter-approved bonded debt. Section 2 says full cash value, after 1975, is the appraised value when property is purchased, newly constructed, or changes ownership. A new base year value is not a yearly trip back to market value.
Revenue and Taxation Code section 70 defines new construction. It includes any addition to real property, land or improvements, since the last lien date. It also includes an alteration that is a major rehabilitation, or that converts the property to a different use. A major rehabilitation is work that converts an improvement into the substantial equivalent of a new one. A new backyard cottage is an addition. So is extra square footage on the house.
Section 71 is the sentence homeowners want. The assessor determines a new base year value for the portion that was newly constructed. The base year value of the remainder, the part that did not undergo new construction, shall not be changed. Section 110.1 says that base year value, for new construction, is fair market value on the date the work is completed.
The Board of Equalization says the same thing in plain language on its new construction page. The new base year value of the new construction is the increment of market value, if any, that the assessor estimates has been added. The value of the existing property is not affected. The Board's July 2025 information sheet on how property is assessed uses a bedroom or a pool as the example: only the new construction is assessed at market value as of completion, and the land and the rest of the property are not reassessed to market because of it. An ADU is that kind of addition. A room addition that adds space follows the same rule. The side-by-side is in ADU vs. a home addition.
Property Tax Rule 463 says the full value of the new construction is only the value resulting from that work. It does not include value increases that are not associated with the construction. The rule also says the taxable value of property removed during construction comes off. If you demolish something as part of the project, the assessor accounts for what was removed. The rest of the enrolled value stays.
What you paid the contractor is not the tax figure. The Board's new-construction answers say the increased tax is based on the estimated market value added by the new construction, and that this will not necessarily be the cost of the work. A steep lot, a long utility run, or a high finish package can make the contract larger than the value the assessor enrolls. The reverse can happen too. Use the cost guide for planning the build. Treat those ranges as planning estimates for the contract, not as the assessed value.
When the new value shows up
If the ADU is only partly built on the lien date, January 1, section 71 says the assessor appraises the new construction at its full value in that unfinished state. That partial value is not the base year value. The same thing happens on each later lien date until completion. When the work is complete, the assessor reappraises the newly constructed portion at full value, and that completed value is the base year value.
The Board describes completion as the date the property, or a portion of it, is available for use. In the Board's answers, available for use means the property has been inspected and approved for occupancy. If there is no such approval, it means the prime contractor has fulfilled the contract. New construction is not available for use if, on that date, it cannot be functionally used or occupied. Property Tax Rule 463.500 is the supplemental-assessment version of that date. The county assessor applies it to the permit and the inspection record. Copies of building permits are sent to the assessor, and the Board says the assessor still has to value new construction even when no permit was issued.
After completion, the new base year value of the ADU can rise each year by an inflation factor. Article XIII A, section 2(b), caps that factor at 2 percent for any given year. The Board's information sheet says the factor is based on the California Consumer Price Index and can be lower than 2 percent. The Board publishes the factor in a letter to assessors. This page does not print this year's factor. The ADU is not reappraised to market every year just because it is a second unit.
A separate rule can move the bill for a different reason. If the property is in a Proposition 8 decline-in-value status, the information sheet says the assessed value can rise by more than 2 percent as the market recovers, but not above the factored base year value, unless there is a change in ownership or new construction. That recovery is not the ADU. If both happen in the same year, ask the assessor which line is which.
The supplemental bill
Revenue and Taxation Code section 75 starts the supplemental chapter. The Legislature's finding is that a change in ownership or completed new construction should be taxed when it happens, instead of waiting months for the next regular roll. Section 75.10 tells the assessor to appraise the new construction at full cash value on the date it is completed. That amount is the new base year value of the new construction.
Section 75.11 says when there is one supplemental assessment and when there are two. If the new construction is completed on or after January 1 but on or before May 31, there are two supplemental assessments. For new construction, the second one is the value change due to the new construction. If completion is on or after June 1 but before the next January 1, there is one supplemental assessment, the difference between the new base year value and the taxable value on the current roll.
The Board's supplemental assessment page is the homeowner version of that statute. A supplemental event produces a bill in addition to the annual property tax bill. The bill is prorated from the first day of the month after the event through the end of the fiscal year. A fiscal year runs from July 1 through June 30. Completion from June 1 through December 31 produces one supplemental bill. Completion from January 1 through May 31 produces two. The second covers the full next fiscal year. A June completion, the Board says, rolls to July 1. There is no supplemental on the current roll, and one bill covers the 12 months of the new fiscal year.
The assessor mails a notice of supplemental assessment showing the net supplemental assessment. The auditor-controller computes the tax. The tax collector mails the bill. The Board's page says a lender that pays your annual bill through an impound account does not get the supplemental bill. It goes to you. If it is late, the penalty is still the penalty. Budget for it next to the loan payment on the financing page. The word itself is in the glossary.
| Tax effective | Months left in the fiscal year | Factor |
|---|---|---|
| July 1 | 12 of 12 | 1.00 |
| August 1 | 11 of 12 | .92 |
| September 1 | 10 of 12 | .83 |
| October 1 | 9 of 12 | .75 |
| November 1 | 8 of 12 | .67 |
| December 1 | 7 of 12 | .58 |
| January 1 | 6 of 12 | .50 |
| February 1 | 5 of 12 | .42 |
| March 1 | 4 of 12 | .33 |
| April 1 | 3 of 12 | .25 |
| May 1 | 2 of 12 | .17 |
| June 1 | 1 of 12 | .08 |
The tax becomes effective on the first day of the month after the month of completion. An October completion is effective November 1. The June 1 row is the factor when the tax is effective June 1, which is a May completion. A completion that happens in June is the special case above: the Board treats it as effective July 1, with one bill for the new fiscal year.
A worked example, with made-up dollars
Every dollar figure in this example is an illustrative planning estimate. It is not a quote, not an appraisal, and not any county's tax rate. The only rate used is the 1 percent general levy in Article XIII A, section 1(a). Local voter-approved bond rates and special assessments are extra, they differ by tax-rate area, and they are left out on purpose. Ask the county auditor-controller for the rate on your bill.
| Piece | Illustrative amount | What it means |
|---|---|---|
| Factored base year value of the house and land, before the ADU | $400,000 | Assumed. This number stays. The ADU does not replace it with market value. |
| Market value the assessor adds for the finished ADU | $150,000 | Assumed. Not the construction contract. The assessor estimates the value added. |
| Assessed value after completion, in this example | $550,000 | $400,000 plus $150,000. Illustrative sum, not a bill. |
| General levy on the old $400,000 | $4,000 a year | $400,000 times 1 percent. Illustrative. The example holds this flat so the ADU piece is easy to see. |
| General levy on the new $150,000 | $1,500 a year | $150,000 times 1 percent. Illustrative annual amount before any local bond rate. |
| One supplemental bill if completion is in October | $1,005 | $1,500 times the Board's published .67 factor for a November 1 effective date. Illustrative. One bill, because October falls in the June through December window. |
Read the last two rows together. The $1,005 does not replace the annual bill. It covers eight months. The next regular bill includes the full illustrative $1,500 on the new value, on top of the tax on the old base. If the same assumed $150,000 were completed in March, section 75.11 and the Board's page call for two supplemental bills: a prorated bill for the rest of the current fiscal year, and a second bill for the entire next fiscal year. This page does not multiply that March case, because the point is the same: the dollars above are a sketch, and the factor comes from the Board, not from a county.
The information sheet also describes a homeowners' exemption that reduces assessed value by $7,000 when the property is your principal residence. This example does not subtract that exemption, and it does not guess whether your current exemption changes. Ask the assessor.
A garage conversion, a junior ADU, and ordinary repairs
The Board's new-construction page sorts common jobs into two columns. On the new-construction side it lists additions, increasing the square footage of a residence, conversion of a garage, unfinished basement, or attic into living area, and conversion of a single-family residence into two or more units. It also lists kitchen and bathroom work that changes the floor plan, upgrades plumbing or electrical systems, increases the size, or replaces cabinets, counters, flooring, or fixtures with upgraded material.
On the other side it lists normal maintenance and repairs: painting, re-carpeting, and replacing old bathroom or kitchen fixtures with modern fixtures of the same kind. Replacing a shake roof with a tile roof is the Board's own example of routine maintenance, so the value from that swap is not assessable.
A garage conversion that turns the garage into living space is on the new-construction list. The assessor adds the value of that alteration. Rule 463 says that value is the value of the alteration, not necessarily its cost, added to the indexed base year value of what was already there. You are not taxed as if the whole house were new.
A junior ADU is built inside the existing house. It does not add a new building in the yard. It can still be new construction, because the Board lists a change from one unit to two or more units, and it lists a change in how a portion of the building is used. Rule 463 covers a physical alteration that changes the way the altered portion is used. The assessor decides, job by job, whether a particular kitchen is the equivalent of a new kitchen or is only a remodel. The Board says that call is the assessor's. If the work is new construction, the enrolled amount is the market-value increment, if any. It is not a second assessment of the house you already have.
The 750-square-foot line you may have heard is an impact-fee rule, not a property-tax exemption. HCD's March 2026 ADU Handbook defines an impact fee as a monetary exaction other than a tax or special assessment, charged to help pay for public facilities. The handbook's FAQ does not include a property-tax question. It does say an ADU of 750 square feet of interior livable space or less is not charged that impact fee, and that an ADU or junior ADU under 500 square feet of interior livable space is not subject to school impact fees. Those are permit fees. They do not remove the unit from section 70. The fee math is on the cost guide.
Rebuilding after a disaster
The new-construction statutes do not name accessory dwelling units. They do cover reconstruction of real property that was damaged or destroyed.
Section 70(c) says that where real property has been damaged or destroyed by misfortune or calamity, new construction does not include timely reconstruction of that property, or of a portion of it, when the property after reconstruction is substantially equivalent to the property before the damage. Reconstruction that is not substantially equivalent is new construction only for the portion that exceeds the substantially equivalent rebuild. The section, as displayed on the Legislature's site, does not define "timely." This page will not invent a number of months.
Article XIII A, section 2(a), is the constitutional version, and it is not worded the same way. It says "newly constructed" does not include real property reconstructed after a disaster declared by the Governor, where the fair market value of the property as reconstructed is comparable to its fair market value before the disaster. One text says misfortune or calamity, timely, and substantially equivalent. The other says a Governor's disaster declaration and comparable fair market value. Show both to the assessor. Do not blend them into one shortcut.
What the words do support: rebuilding an ADU that was already there, so the property is substantially the same, is the reconstruction those texts describe, if the rest of the test is met. Building an ADU that was not there before is an addition under section 70(a). The code does not create a separate exclusion for a new ADU on a lot that had a fire or a flood. The Board's published list of new-construction exclusions includes the section 70(c) disaster line. It does not include an ADU line.
What does not change
Building the ADU does not reset the base year value of the house and land. Section 71 says the remainder shall not be changed. The Board's information sheet says the land is not reassessed to market value because of an addition. Your neighbor's bill can still look nothing like yours, because Proposition 13 keeps each base year value tied to when that property was acquired or built. The information sheet walks through that with two houses bought years apart. The ADU does not put you in your neighbor's purchase year.
There is also no ADU exclusion on the books to claim. The Board's new-construction page lists exclusions for disaster reconstruction, active solar, fire systems, disabled-access work, seismic retrofits, and a few others. An accessory dwelling unit is not on that list. Senate Bill 1164 (2023-2024) would have added a temporary exclusion as Revenue and Taxation Code section 74.9. The Legislature's status page shows the bill died in the Assembly on November 30, 2024. It is not law. Ignore a post that treats it as current.
Selling the ADU by itself is a different topic. Government Code section 66342 lets a city adopt an ordinance to convey the main house and the ADU as condominiums. That sale would be its own change in ownership under Article XIII A. This page is about building the unit while you still own the lot.
Rent is a different tax. Money a tenant pays you is income tax, not this property-tax bill. This page does not tell you what to deduct, how to depreciate the unit, or how to report the rent. Ask a tax professional. The household math of rent, with its own planning estimates, is in the rental income guide and the ROI note.
What to do before you pour a slab
- Call the county assessor, not the planning counter, about the tax. The Board's county contacts list has the assessor, the auditor-controller, and the tax collector for each county. The assessor enrolls value. The auditor-controller computes the tax and knows the local rate. The tax collector collects it.
- Ask the assessor for an estimate of the value they would add for the plans you actually intend to build: detached cottage, garage conversion, or junior ADU. Bring the size and whether you are adding square footage or only changing existing space. An estimate from that office is theirs. The dollars on this page are not a substitute.
- Budget for a supplemental bill on top of the annual bill. It can arrive months after the final inspection, and your lender may not pay it from the impound account. If completion falls between January and May, plan on two supplemental bills.
- Keep the completion date. The final inspection or the certificate of occupancy is what the Board describes as available for use. That date starts the proration.
- Do not subtract a 750-square-foot property-tax break. That square-foot line is an impact fee. Property tax follows section 70 and section 71.
Questions homeowners ask
Will an ADU reassess my whole house to market value?
No. Section 71 gives a new base year value to the newly constructed portion only. The base year value of the rest of the property does not change. The land is not reassessed to market because you added the unit.
When does the higher bill show up?
After the new construction is complete, the county issues a supplemental bill in addition to your regular bill. Completion from January 1 through May 31 produces two supplemental bills. Completion from June 1 through December 31 produces one. A June completion is the Board's special case: that single bill covers the next fiscal year. The following annual bill includes the new base year value for a full year.
Does a garage conversion or a junior ADU inside the house count?
The Board lists conversion of a garage into living area, and conversion of a single-family house into two or more units, as new construction. Ordinary repairs, such as paint or replacing fixtures with similar modern fixtures, are not. The assessor decides which column a particular job is in, and adds the market value of the work, if any. The rest of the house keeps its base year value.
Is there a property-tax exemption for ADUs?
Not in current law. The Board's published list of new-construction exclusions does not include an ADU. SB 1164, which would have created one for a limited time, died on November 30, 2024. The 750-square-foot and 500-square-foot lines are impact fees and school fees, not a property-tax exemption.
If I rent the ADU, is that the same as the property-tax increase?
No. The property-tax increase is the assessor's value for the new construction, billed by the county. Rent is income. This page does not give income-tax advice. Ask a tax professional before you count rent against the new bill. A planning sketch of rent is in the rental income guide, and those rent figures are planning estimates, not a survey of your block.
The free guide covers planning, permits, and financing. It does not replace a call to your county assessor.
Get the Free Guide
Sources
Checked November 12, 2026. Statute text was read that day on leginfo.legislature.ca.gov. Board of Equalization pages and the March 2026 HCD handbook were opened that day. Last reviewed: November 12, 2026.
- California Constitution, Article XIII A. Section 1(a) is the 1 percent general levy. Section 1(b) allows added rates for voter-approved bonded debt. Section 2 sets full cash value at purchase, new construction, or change in ownership, caps the yearly inflation factor at 2 percent, and states the disaster-reconstruction rule for a Governor-declared disaster when fair market value is comparable.
- Revenue and Taxation Code section 70. New construction means an addition, or an alteration that is a major rehabilitation or a change in use. Section 70(c) is the misfortune-or-calamity reconstruction rule. The displayed section does not define "timely" and does not name ADUs.
- Revenue and Taxation Code section 71. New base year value for the newly constructed portion only. The remainder does not change. Unfinished work on the lien date is appraised, and it does not yet have a base year value.
- Revenue and Taxation Code section 110.1. Base year value for new construction is fair market value on the date of completion.
- Revenue and Taxation Code section 75. Supplemental assessments exist so a change in value from completed new construction is enrolled when it happens.
- Revenue and Taxation Code section 75.10. The assessor appraises completed new construction at full cash value on the completion date. That is the new base year value of the new construction.
- Revenue and Taxation Code section 75.11. Two supplemental assessments if completion is January 1 through May 31. One if completion is June 1 through the day before the next January 1.
- Board of Equalization, New Construction. What counts, including a garage, basement, or attic converted to living area, and a single-family house converted to two or more units. What does not count, including ordinary repairs. The new base year value is the market-value increment. Cost is not necessarily the assessed value. The exclusion table has no ADU row. Completion and permit discovery are in the answers on that page.
- Property Tax Rule 463, Newly Constructed Property (PDF). The new base year value is only the newly constructed portion, whether an addition or an alteration, and value removed during construction is accounted for.
- Property Tax Rule 463.500, Date of Completion of New Construction, Supplemental Assessments (PDF). Date of completion for a supplemental assessment.
- Board of Equalization, Supplemental Assessment. One bill versus two, proration from the first day of the next month, the factor table used above, the June roll to July 1, the notice, and the statement that supplemental bills go to the owner rather than the lender. The 1.025 percent rate in the Board's own examples is labeled there as illustrative. This page does not use that rate.
- Board of Equalization information sheet, How Property Is Assessed, enclosed with Letter to Assessors 2025/023 (PDF). Proposition 13, the 1 percent rate plus voter-approved debt, the 2 percent inflation cap, the bedroom-addition example, the $7,000 homeowners' exemption on a principal residence, and which county office does which job.
- Board of Equalization, county assessors, auditors, and tax collectors.
- HCD Accessory Dwelling Unit Handbook, March 2026 (PDF), from the ADU Handbook page. The handbook's FAQ has no property-tax item. Its fees section defines an impact fee as a monetary exaction other than a tax or special assessment, and it states the 750-square-foot and 500-square-foot fee lines. Those lines are not a property-tax exemption.
- SB 1164 (2023-2024), bill status. Proposed new-construction exclusion for accessory dwelling units. Died in the Assembly on November 30, 2024. Not law.
- Government Code section 66342. A city may adopt an ordinance to sell the primary dwelling and the ADU as condominiums. Mentioned only to separate that sale from the tax result of building the unit.
Related pages: financing, the cost guide, whether an ADU is worth it, rental income, garage conversions, junior ADUs, and the glossary.