How will building an ADU affect my taxes and property value?

Adding an ADU will likely affect your property taxes and the resale value of your home. However, your primary house will not be reassessed, and your property taxes will only increase based on the added value of your ADU. For example, if you build an ADU that adds $150,000 to your property value, and your tax rate is 1%, your taxes will increase by 1% x $150,000, or $1,500 per year.

Building a JADU will have a significantly smaller impact on assessed value. In some cases, your taxes will not increase at all. Home sharing will also not increase the assessed value of your home. Generally, garage conversions will not raise your tax bill as much as new construction, but they will also not add as much value.

Each property will require a one-on-one analysis to determine the added value of an ADU, so contact the Humboldt County Assessor’s Office once you have an idea of your plan. Call (707) 445-7663 or send an email to assessor@co.humboldt.ca.us and they will be able to provide you with a rough estimate of tax implications.

Adding an ADU may impact your income taxes as well. This can be rather complicated, and it’s best to discuss these with a tax advisor. The rental income you receive for your ADU is taxable, but you can deduct the cost of allowable maintenance and depreciate the cost of construction, which can often reduce or eliminate any tax increase. You may also have capital gains tax related to the increased value when you sell your property.

Note that your unit could be assessed different ways for different purposes. If you are trying to get a loan, the bank might be more conservative and assume the value of your home will increase less.