Here is the situation:
This is in California
My family's home was bought 10 years ago at $1,000,000, they are paying over $10,000 in taxes every year.
The current market value of the home is around $1,500,000
We are building an addition, a separate detached accessory dwelling unit with 600 sf of space.
According to this document, the assessed value of the new construction will be added to the value of the existing property assessment https://www.smcacre.org/how-construction-affects-taxable-value
But what exactly does this mean?
Lets say the new construction is assessed at $200,000, and will create additional $2,000 in taxes every year.
Does this mean the total tax bill would be $10,000+$2,000 = $12,000 ?
Or does this mean the current property will be re-assessed at the current market value and the new construction is added to it? so the total tax bill will be assessed at ($1,500,000 + $200,000)*1% = $17,000 ?
As you can see $5,000 a year is a big deal, especially with a family who is retiring, and will be important when making the decision.
If the new tax bill will be $17,000, does this mean we are better off not doing the construction, or will the property automatically be assessed to $15,000 after a few years anyway?
Also, how does Prop 13 factor into this? Would it prevent our property taxes from going up by more than 2% every year? In this case by no more than $200 each year?
Also, prop 13 refers to 2% of the taxable amount or 2% of the market value? In other words, are we talking about yearly property tax increase of %1 of the 2% which = $200, or 2% of the market value which is $20,000?