Ask an Expert: Is Entire Property Reassessed for Taxes After an Addition?

Morrow family

Question: Over the past few years I have remodeled every square inch of my small 1921 home near Venice Beach. During that time the property value has increased significantly. I would like to continue to improve the property by adding a garage, three more bedrooms and two more bathrooms. The home is about 1,000 square feet, so an addition would double or triple the size. My concern is that a remodel might trigger a re-assessment of the property value. How does this work? Would my assessed value increase by the cost of the construction, or would my property tax after the remodel reflect the new market value including the land? How and when are property taxes raised following major remodels? — J.F.

Answer: Here is some insight from Bonnie Oliver, Assistant Assessor, for Assessor Rick Auerbach:

Thank you for the opportunity to clarify the Los Angeles County Assessor’s new construction appraisal procedures. The question posed by your reader was: Would extensive additions or remodeling increase their property tax based on the new square footage of her addition, or would it cause a reappraisal of his or her entire property, including the land?

Under Proposition 13, the entire property will only be completely reappraised in cases of the real estate transferring ownership. So that is the good news. The Assessor will add assessed value for any new building area, bathrooms, swimming pools, patios, kitchen islands, fireplaces, and additional built-in appliances. Replacement of existing windows, floors, kitchen counters, cabinets and appliances will be excluded from reappraisal.

However, an example of where these items may not be excluded would be when a house is demolished completely to studs or foundation, and rebuilt essentially as new. In this situation, the end result is a new house . . . not just something remodeled; this will result in a significant increase in the assessed value of the home.

We would like to clarify the basis of the cost per square foot the Assessor uses for calculating the added value of additions. The Assessor is mandated to enroll market value for any added new construction, and one method our appraisers use to determine the market value of a property is the cost approach. The staff uses standardized lists of costs, based on surveys of new construction professionals. These costs vary by the size of the addition and the quality of the new construction. For example, our costs for an 800 square foot addition run between $80 and $260 per square foot, depending on the quality of construction. Many times, taxpayers provide us with their actual costs, which can improve the accuracy of our appraisal.

In some instances, where costs may not be available (luxury or complex residences, for example), a “pre and post” analysis may be done. This analysis determines the value of the property before and after the addition. The difference in value would be the increase in market value contributed by the addition.

Once the value of the new construction is determined, it is added to the homeowner’s taxable value. This results in Supplemental bills, which are prorated from the date of completion of the work to the end of the fiscal year (June 30). The added amount then becomes part of the subsequent annual tax bills, the ones most owners are familiar with, due in December and April.

We value suggestions and comments on how we can better met the needs of the community we serve. Information on the topic of new construction and remodels will be added to our website in the near future. Thank you for identifying the effects of remodeling and new construction on property values as a topic to add to our website Please let us know if you have any additional suggestions to improve our website’s effectiveness.