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Learn about new construction, remodel, and repair
We review DBI permits to determine if a project is assessable or excluded from reassessment.
In Progress New Construction
The Assessor is required by the State of California to value all in-progress new construction each year. We mail a letter to property owners who have an open permit for new construction as of January 1. Taxpayers are asked to return the form included in this letter summarizing the status of the project, including the percent complete as of January 1.
If construction is in progress as of the January 1 lien date, an estimate of value of the portion completed is added to the property's assessment.
Completed New Construction
Completed new construction projects are assessed "supplemental events." California property tax law defines “new construction” as:
- 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.
One common method to assess new construction is the cost approach. The cost approach considers all costs incurred during the course of construction. These “full economic costs” include labor, materials, permit fees, contractor’s overhead and profit.
If construction is in progress over any January 1 lien date, an estimate of value of the portion completed is added to the property’s assessment.
Projects that consist of building a new building, increasing the square footage of a property, or adding improvements to a home that didn’t previously exist are all considered assessable new construction.
Below are some examples of such projects.
- Horizontal addition
- Vertical addition
- Converting an unfinished basement or attic into living space
- Adding a new bathroom
- Adding a garage
- Adding an elevator
Only the portion that is being remodeled or added to the existing home is assessed and added onto the factor base year value.
Repair
If a new construction project is part of normal maintenance and repair, such as dry rot repairs or roof replacements, then they are not considered assessable. Projects that are cosmetic like replacing bathroom or kitchen fixtures of similar quality are not considered assessable.
Any projects that raise the quality class or extend the life of the property are considered assessable. These “like new” or substantially equivalent to new renovations involve more substantial structural changes. Examples include projects that change the layout of the kitchen or bathroom, alter the use of current property, or upgrade the capacity of the plumbing or electrical systems.
Here are a few more examples, but keep in mind that the scope of each project varies, so our office reviews each permit individually to determine if it is assessable or not.
Assessable
- Bathrooms - the addition of a new bathroom; structural changes to an existing bathroom; upgrading the plumbing and/or electrical systems; changing the floor plan; increasing the size; or replacing cabinets, countertops, flooring or fixtures with upgraded material and finishes.
- Kitchen - structural changes; upgrading the plumbing and/or electrical systems; changing the floor plan; increasing the size; replacing cabinets; or replacing countertops, flooring or built-in appliances with upgraded material and finishes.
- Completely renovating a property or portion thereof, i.e. down to studs.
- Change of use, i.e. converting from industrial to residential use.
- Upgrading electrical capacity from 110v to 220v.
Not Assessable
- Bath/Kitchen remodel - Repair and replacement of cabinets, countertops, flooring, fixtures or built-in appliances with items of similar quality.
- Dry rot or termite repairs.
- Reroofing.
- Replacing or repairing doors, windows, fences or decks.
Exclusions
Submission Deadline: Before or within 30 days of the start of construction.