ADUs
Will building an ADU raise my property taxes?
The honest answer is smaller than people fear and less generous than several builder blogs are telling you.
Yes, but not the way people fear. Building an ADU does not trigger a reassessment of your whole property. The assessor values the new construction and adds that to your existing assessed value — your house keeps the Proposition 13 basis it already had. And to correct something widely repeated online: there is no 10-year or 15-year ADU property tax exclusion in California. The bill that would have created one, SB 1164, died in committee in 2024. Confirm your own numbers with your county assessor, not with a contractor.
What actually happens when the ADU is finished
Under Proposition 13, your property is reassessed at market value when it changes ownership or when there is new construction. An ADU is new construction — but the reassessment applies to the new construction only.
So the assessor puts a value on the ADU and adds it to the assessed value already on your roll. The existing house is not revalued. If you have owned your home for twenty years and are carrying a very old Prop 13 basis, that basis survives the project. This is the single most common worry we hear about ADUs and it is largely unfounded.
The assessor is valuing the ADU, and the assessed value is not the same thing as what you paid us to build it. We are a builder, not a tax adviser, and we will not guess at your bill. The Santa Clara County and San Mateo County assessor's offices will both answer this question directly, and that is the answer worth having.
The 15-year exclusion you have read about does not exist
Search for this topic and you will find contractor blogs, and a fair number of AI answers built on them, describing SB 1164 as a live law that keeps a new ADU off the assessment roll for 10 or 15 years. Some of them tell you to notify the assessor within 30 days to claim it.
SB 1164 never became law. It would have added section 74.9 to the Revenue and Taxation Code. Its first hearing in the Assembly was cancelled at the author's request in June 2024, and the Legislature's own bill record now shows it as an Inactive Bill — Died, out of the Assembly without further action on 30 November 2024. There is no section 74.9. There is nothing to claim, and no 30-day notice to file.
We are flagging it because acting on it has a real cost: budgeting a project on the assumption that no tax follows for a decade is a budgeting error, and it is the kind that shows up years after the person who told you has moved on.
How to think about it against the rest of the project
The tax increase is an ongoing operating cost of the unit, in the same category as insurance and maintenance rather than in the category of construction cost. If the unit is going to be rented, it belongs in that calculation. If it is for a parent or an adult child, it is simply a cost of the space.
What we can tell you with confidence is the construction side. A good-quality ADU in our area runs $300K–$360K for a good-quality build, of which roughly $13,500–$18,500 is fixed soft cost — plans, survey and certification, soils work — that does not scale down as the unit shrinks. That is the number to plan against.
Two related things people conflate with property tax
| What it is | When you pay it | Who sets it |
|---|---|---|
| Property tax on the ADU | Annually, once the unit is finished and assessed | County assessor, under Prop 13 rules |
| Impact fees | Once, at permit. None at all on an ADU of 750 sq ft or less of interior livable space (Gov. Code §66311.5(c)(1)) | The city or special district |
| Connection fees and capacity charges | Once, at permit or connection. These are expressly NOT impact fees and are not covered by the small-unit exemption | The utility, water corporation or special district |
The middle row is the one worth designing around, because it is a genuine cliff rather than a slope. The bottom row is the one that surprises people who were told their small unit was “fee exempt”.
Common questions
Does building an ADU trigger a full property reassessment in California?
Is there a 15-year property tax exclusion for ADUs in California?
How much will my property tax go up if I build an ADU?
Do I pay impact fees on a small ADU?
Does an ADU affect my Proposition 13 basis on the main house?
Where to go next
Written by the team at Elusive Construction, a licensed California general contractor (B #1112902) building in Santa Clara and San Mateo counties. General information about how residential construction works — not legal advice. For your specific contract, talk to an attorney.
Also Worth Reading
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Cost guides
What an ADU, an addition, a kitchen or a whole house actually costs here, and what moves each number.
Our own projects
Two jobs written up start to finish, including what we found once the walls were open.
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