Your assessment may be adjusted when there is construction activity on your property. The impact on your assessment will vary depending on the work that is being performed. Under California property tax law your project will be reassessed for ‘new construction’. Normal maintenance and repairs are not considered new construction and not subject to assessment.
What is New Construction?
Under California property tax law, "new construction" is defined in four general categories:
- Any substantial addition to land or improvements, including fixtures.
- Any physical alteration of any improvement, or a portion thereof, to a "like-new" condition, or to extend its economic life, or to change the way in which the improvement, or portion thereof, is used.
- Any substantial physical alteration of land which constitutes a major rehabilitation of the land or changes the manner in which it is used.
- Any substantial physical rehabilitation, renovation or modernization of any fixture that converts it to the substantial equivalent of a new fixture or any substitution of a new fixture.
“The assessor shall determine the new base year value for the portion of any taxable real property which has been newly constructed.” - Section 71, CA Revenue and Taxation Code.
Typical projects that qualify as assessable new construction
- Additions to existing improvements
- Increasing the square footage of a home
- Converting an unfinished basement or attic into a living area
- Adding a garage, sunroom, enclosed patio, or elevator
- Adding a swimming pool, spa, sauna, patio, or deck
- Demolition of an existing structure (value may be removed)
- Bathroom - the addition of one, structural changes, upgrading of plumbing and/or electrical systems, changing the floor plan, increasing the size, replacing cabinets, countertops, flooring or fixtures with upgraded material and finishes
- Kitchen - structural changes, upgrading of plumbing and/or electrical systems, changing the floor plan, increasing the size, replacing cabinets, countertops, flooring or built-in appliances with upgraded material and finishes
- Taking an entire house or a portion of the house down to studs
- A change in use (for example, converting from industrial to residential use or converting storage space to habitable space)
- Upgrading the capacity of plumbing or electrical systems (for example, increasing electrical capacity from 110 volts to 220 volts)
Typical projects that do not qualify as assessable new construction
- Central heating and cooling system, or replacement of wall or floor heating with baseboard heaters
- Galvanized waterlines with copper or plastic waterlines
- Wood-framed windows with energy efficient metal or aluminum frames;
- Dry rot or termite damaged joists, studs, rafters, stairway, and/or exterior siding
- Molding strips, plaster, drywall, and wall paneling with similar substitute materials
- Wall or floor covering
- Kitchen or bathroom cabinets, countertops, flooring, fixtures, or built-in appliances with items of similar quality
- An electrical fuse box with circuit breakers
- Doors, windows, stairs, fences or decks or repairing thereof
- Roof cover with material of similar quality
- Rebuild after a fire, flood, or natural disaster
How is New Construction Assessed?
Reassessment of a property is required any time new construction occurs (Section 71, Revenue and Taxation Code). Thus, new construction, when not considered normal maintenance or repair, is assessable if it adds value to the property. The market value (not necessarily the cost) of the addition or other "new construction" is determined by the assessor and added to the existing property assessment. The value of the existing property is not affected.
New construction that adds value to the property represents the incremental value added to the existing property and will generate a supplemental assessment. The previously existing property, however, is not reappraised; its assessed value will not change except for the annual inflation adjustment of up to two percent.
It is important to note that the county assessor, by law, is required to value all new construction, even if a building permit has not been issued. However, not every building permit for new construction results in reassessment. In general, the Placer County Assessor’s Office processes thousands of building permits annually, yet less than half result in supplemental assessments.
How does the assessor discover new construction projects?
The county assessor becomes aware of such new construction because copies of all building permits issued by a county or city are required to be sent to the county assessor. Discovery of new construction can also occur in a variety of other ways, such as that reported at the time a property transfers ownership, information volunteered by the public, or personal observation by county assessor's staff performing routine field checks.