California ADU Property Tax 2026: SB 1164 Died, Prop 13 Still Protects You

A lot of California homeowners have seen the same sales pitch: build an ADU now because SB 1164 gives you a long property tax holiday. That pitch is wrong. SB 1164 never became law. But the tax story is still much better than many owners think. Under Proposition 13, adding an ADU generally does not reset the assessed value of your entire property. Only the newly constructed portion is assessed at current value, while the rest of the house keeps its existing tax base. For the broader rules, see our California ADU laws guide. If you are comparing smaller-unit strategies or financing, see our JADU vs Attached ADU guide and ADU financing guide.

Bottom Line

SB 1164 is one of the most misunderstood ADU bills in California. The official record shows three things. First, the bill died on November 30, 2024 after stalling in the Assembly. Second, the final amended text would have provided a temporary exclusion for 10 years, not 15 years, for qualifying ADUs completed between January 1, 2025 and January 1, 2030. Third, even if it had passed, the exclusion would not have been automatic: the owner would have needed to notify the assessor, submit an affidavit, and maintain residential use. [1][2][8]

The good news for homeowners is that current law already protects the part of the property that usually matters most. Under Prop 13, when new construction happens on only part of a property, the assessor assigns a new base year value to that newly constructed portion, while the remainder of the property keeps its existing base year value. In plain English: building an ADU does not usually revalue your entire house and land to today's market price. [3][4][5]

That distinction matters. If your main house carries a very old, very low assessed value, the real tax win is often not a hypothetical holiday on the ADU itself. The real win is avoiding a full reset on the original house. [4][5][6]

Rumor	Reality
"SB 1164 gave ADUs a 15-year tax break."	No. The bill died, and the final amended text had been reduced to 10 years. [1][2][8]
"If I build an ADU, the county reassesses my whole property."	No. Only the newly constructed portion gets a new base year value; the rest keeps its existing base year value. [4][5]
"The tax increase waits until next year's normal bill."	Not always. Supplemental assessments can hit sooner, and events between January 1 and May 31 can trigger two supplemental assessments. [3][5]
"There is no already-effective tax benefit for owner-occupants."	Owner-occupants can still claim the $7,000 Homeowners' Exemption on their principal residence. [3][7]

What SB 1164 Actually Proposed

This is where a lot of online summaries went off the rails.

SB 1164 proposed adding Revenue and Taxation Code section 74.9. The basic idea was simple: treat qualifying ADU construction as something other than "new construction" for property tax purposes, so the assessor would not immediately add a new taxable base year value for that ADU. But the official bill text was narrower, shorter, and more conditional than most marketing blurbs suggested. [2]

Here is what the final amended bill would have done:

Issue	What the final text said
Which projects qualified	ADUs completed on or after January 1, 2025 and before January 1, 2030. [2]
How long the exclusion lasted	Until the earliest of: 10 years from the first lien date after completion, a later change in ownership, or conversion to non-residential use. [2]
What the owner had to do	Notify the assessor before or within 30 days of completion, submit an affidavit, maintain residential use, and provide supporting documents if requested. [2]
What ended the benefit	Time expiration, ownership change, or non-residential use. [2]
What actually happened	Passed the Senate 29-6 on May 22, 2024, then stalled in Assembly Revenue and Taxation. The June 24, 2024 hearing was canceled at the author's request, and the bill died on November 30, 2024. [1][8]

That table ends on November 30, 2024. It is now March 2026 — nearly sixteen months later. The 2025-2026 California legislative session opened and has produced no companion bill, no reintroduction, no amended successor. That silence is itself a signal. If the political coalition that passed SB 1164 out of the Senate 29-6 had enough momentum to revive it, something would have appeared in the hopper by now. It has not.

The most interesting detail is the one many experienced readers still miss: the final amended text had already reduced the duration from 15 years to 10 years. That matters because plenty of blogs, lender pages, and contractor pages still repeat the older version as if it were enacted law. They are not just outdated on status. They are outdated on substance. [2]

Another subtle point: even this homeowner-friendly bill would have required paperwork and compliance. The exclusion would not have been self-executing. Owners would have had to tell the assessor they intended to claim it, swear they would make a good-faith effort to keep the unit in residential use, and report a later conversion away from residential housing. [2]

That is why "SB 1164 would have been great if it passed" is a fair emotional reaction, but "SB 1164 is current law" is simply wrong.

Why This Still Matters to Homeowners

A dead bill matters because it reveals the fear sitting underneath the conversation.

What homeowners really worry about is not legislative trivia. They worry about a catastrophic tax event: "If I add a backyard unit, will the county take my low Prop 13 basis and reprice the whole property at today's market value?"

Under current California property tax rules, that is generally not how it works. The Board of Equalization's assessor manual says that when new construction occurs on only a portion of a property, the newly constructed portion gets its own base year value, and the remainder retains its existing base year value. [4] San Mateo County's assessor explains the same idea in even plainer language for ADUs: new construction such as an ADU is assessed at market value upon completion, but "the existing land and structures not involved in new construction will not be reassessed." [5]

For many long-time owners, that is the real headline. If your main house has decades of Prop 13 protection embedded in it, the state's current system is already shielding the old part of your tax base. The assessor is adding a layer, not replacing the whole stack. [4][5][6]

What Prop 13 Still Does for ADU Owners

1. It protects the old part of your tax base

Prop 13 changed California from a pure current-market-value property tax system to an acquisition-value system. The BOE explains that property is generally reassessed to current market value only when there is a change in ownership or completion of new construction, and annual increases in base year value are generally capped at no more than 2 percent. [3][6]

That framework is exactly why an ADU project does not usually "blow up" the tax base on your original house.

The cleanest official example comes from the San Mateo County Assessor. On its ADU page, the county shows an existing assessed value of $346,500, then adds $100,000 as the market value of the completed ADU, producing a new assessed value of $446,500. The land stays at $110,000. The preexisting improvements stay at $236,500. Only the ADU increment is added. [5] Other counties follow the same BOE framework, though their valuation methodology, cost-per-square-foot benchmarks, and local bonded debt rates differ — always confirm the specifics with your own county assessor.

That is the tax story most homeowners need to understand. If your lot and primary residence already carry a low historic assessed value, Prop 13 is preserving that older number. The county is not starting over from the Zillow estimate of the whole parcel.

2. It limits annual growth on the protected portion

The BOE's Prop 13 explanation is straightforward: the property tax rate is limited to 1 percent plus the rate needed to service local voter-approved bonded debt, and future increases in base year value are generally limited to a maximum of 2 percent per year. [6]

So if you owned your home before building the ADU, the protected pre-ADU portion of the property continues to live inside that Prop 13 framework. That does not make the ADU tax-free. It makes the tax hit narrower.

A simple way to think about it:

If the assessor determines your completed ADU added $150,000 in market value, the base 1 percent tax on that increment starts at about $1,500 per year, before local bonded debt and assessments.
If the assessor determines the ADU added $300,000 in market value, the base 1 percent tax on that increment starts at about $3,000 per year, before local bonded debt and assessments.

That is real money. But it is fundamentally different from resetting an entire property to current market value. For an owner sitting on a deeply protected Prop 13 basis, that difference can be enormous.

3. It changes when you feel the tax increase

Many owners assume the added assessment just shows up someday on the next regular annual bill. Often, it reaches you sooner — and in larger chunks than the annual number suggests.

The BOE explains that completed new construction goes onto the supplemental roll, which exists specifically to put reappraisals into effect immediately rather than waiting for the next January 1 lien date. [3] The supplemental assessment is prorated for the portion of the fiscal year remaining after the completion date using an official monthly factor table. [3][9]

The double-bill scenario. If new construction is completed between January 1 and May 31, two supplemental assessments are issued: one covers the remainder of the current fiscal year, and the second covers the entire next fiscal year. [3] Here is what that looks like in dollars: an ADU completed on March 15 that adds $200,000 in assessed value will trigger a first supplemental bill of roughly $550 (covering April–June at the 0.25 proration factor and a 1.1% effective rate), followed shortly by a second bill of roughly $2,200 covering the full next fiscal year. That is approximately $2,750 in supplemental bills arriving within about 15 months of completion, on top of the regular annual secured tax bill. [9]

Two things most owners do not know. First, county assessors typically send supplemental bills within three to nine months of completion, but delays of up to twelve months are not unusual — the bill does not arrive the week after the inspector signs off. [11] Second, the BOE explicitly warns that lending agencies do not receive a copy of the supplemental bill even if they normally pay the owner's annual tax bill through escrow. The bill goes directly to the owner. Missing it carries a 10 percent penalty. [9]

County guidance adds another practical wrinkle. San Mateo County notes that if the ADU is only partially complete on January 1, a partial assessment can be added to the annual tax bill, with the final value assessed when the project is completed as a supplemental event. [5]

The tax pain is not just about how much. It is also about when the bills arrive and who is responsible for paying them.

4. ADU type determines how much value is actually added

The Prop 13 framework protects the existing house regardless of which ADU path you choose. But the size of the new assessed value — the increment the county adds — varies significantly depending on construction type.

Detached new construction ADU is assessed as a complete newly built structure at current market value. This typically produces the highest tax increase of the three paths.

Garage conversion to ADU is still legally classified as "new construction" under Revenue and Taxation Code Section 70 because it converts the space to a new use. However, the county evaluates only the added value, not the entire structure. The garage already carries its own assessed value on the roll; the assessor adds the incremental improvement above that existing value. The actual tax increase is generally lower than for a detached new build of equivalent square footage.

JADU (Junior ADU, up to 500 sq ft inside the existing house) typically has the smallest tax impact of the three. Multiple county assessors — including San Mateo County — have stated that a JADU created through minimal interior improvements may result in little or no assessed value increase, depending on the scope of work. [5] If the conversion does not require demolishing existing walls down to the studs, the assessor evaluates only the specific improvements added (a kitchen unit, a separate entrance, a bathroom fixture), not the entire room.

The practical implication: homeowners considering a garage conversion or a JADU primarily for tax reasons should understand that the Prop 13 partial-assessment protection already applies to all three paths. The strategic difference is how large the new taxable increment will be. For a full comparison of project scope, cost, and regulatory tradeoffs, see our JADU vs Attached ADU guide and ADU parking and garage conversion guide.

5. Owner-occupants can still claim the Homeowners' Exemption

This is not an ADU-specific program, but it is a real, already-effective property tax benefit that many owner-occupants forget to factor in.

The BOE's California Property Tax guide says the Constitution requires a $7,000 reduction in taxable value for qualifying owner-occupied homes used as the owner's principal residence. [3] San Mateo County's assessor says the same thing and notes that the exemption reduces the tax bill for principal residences. [7]

At the 1 percent base rate, that exemption is worth about $70 per year, plus whatever local bonded rates apply. It is not large enough to change the economics of an ADU project by itself. But it is real. And unlike SB 1164, it is already on the books. [3][6][7]

The Practical Decision for Homeowners

If you are deciding whether to build, here is the disciplined way to think about the tax side.

Do not underwrite your project based on a rumor. SB 1164 did not pass. If a contractor, lender, or blog is still selling the deal as if California adopted a 15-year ADU property tax exemption, they are giving you outdated information on both the law and the duration. [1][2]

Do underwrite based on current law. Current law says the ADU increment can be assessed, supplemental bills can arrive sooner than expected, and the original house generally keeps its existing Prop 13 base year value. [3][4][5][6]

Do not confuse property taxes with fees. A smaller JADU or sub-500-square-foot strategy may still save money on other parts of the project, but that is a different question from whether your ADU value itself is excluded from reassessment. If you are comparing those small-unit paths, see our JADU vs Attached ADU guide. Impact fees are a separate and often larger upfront cost — see our ADU impact fees guide for how those interact with project economics.

If you are in an AB 1033 city and considering a future separate sale, the Prop 13 protection extends to that exit too. Under Revenue and Taxation Code Section 65.1, when a condominium unit is sold separately, only the unit being transferred is reassessed — not the other units on the same parcel. [10] That means a homeowner who builds an ADU, condo-maps it under AB 1033, and later sells the ADU unit as a separate condo retains the existing Prop 13 base year value on the primary residence. The ADU buyer receives a new base year value at the purchase price; the original owner's main house is untouched. For the full mechanics of AB 1033, see our AB 1033 condo conversion guide.

If your deal only works with a future tax holiday, the deal is fragile. If your deal works under today's Prop 13 framework, that is a stronger project. For financing scenarios and payment math, see our ADU financing guide.

Before you finalize plans, ask your county assessor five basic questions:

How will the county value my specific ADU type: detached new construction, attached addition, or conversion of existing space?
If my project is incomplete on January 1, how does the county handle partial assessments?
When should I expect the supplemental assessment notice after completion, and will it come directly to me even if I escrow my taxes?
If this is my principal residence, is my Homeowners' Exemption already in place?
If I later sell the ADU separately as a condo under AB 1033, how will that affect my primary residence's assessed value?

Those questions are boring. They are also more valuable than another round of social media speculation about SB 1164.

The Real Takeaway

If SB 1164 had passed, it would have been a meaningful temporary incentive. But homeowners do not need to wait for a fantasy statute to have a tax advantage in California.

The advantage already exists, and it is more grounded than the rumor mill admits. Prop 13 generally protects the existing house and land from a whole-property reset. The county adds the value of the newly constructed ADU, but the rest of the property keeps its existing base year value. Your tax bill may go up. It may even show up faster than you expect through a supplemental assessment. But that is very different from losing the low tax basis you have built up over years or decades. [3][4][5][6]

That is the point homeowners should remember: SB 1164 would have been nice. Prop 13 is the reason many ADU projects are still tax-feasible today.

References

[1] California Legislative Information, "SB-1164 Property taxation: new construction exclusion: accessory dwelling units. Status." Status page showing "Inactive Bill - Died," the June 24, 2024 canceled hearing, and the November 30, 2024 final Assembly actions. https://leginfo.legislature.ca.gov/faces/billStatusClient.xhtml?bill_id=202320240SB1164
[2] California Legislative Information, "SB-1164 Property taxation: new construction exclusion: accessory dwelling units. Bill text." Final amended text describing the proposed January 1, 2025 to January 1, 2030 window, the 10-year duration, assessor notice, affidavit, and residential-use conditions. https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202320240SB1164
[3] California State Board of Equalization, "California Property Tax" (March 2025). BOE publication describing Prop 13 base year value rules, supplemental assessments, and the Homeowners' Exemption. https://www.boe.ca.gov/proptaxes/pdf/pub29.pdf
[4] California State Board of Equalization, Assessors' Handbook Section 410, "Assessment of Newly Constructed Property." Guidance stating that when new construction occurs on only a portion of a property, the newly constructed portion receives its own base year value and the remainder retains its existing base year value. https://www.boe.ca.gov/proptaxes/pdf/ah410.pdf
[5] San Mateo County Assessor-County Clerk-Recorder & Elections, "Accessory Dwelling Unit." Official county guidance explaining that ADU new construction is assessed at market value upon completion, while existing land and structures not involved in the new construction are not reassessed; includes example calculations and partial-completion timing guidance. https://smcacre.gov/assessor/accessory-dwelling-unit
[6] California State Board of Equalization, "Decline in Value - Proposition 8." BOE summary of Proposition 13's 1 percent tax rate limit, voter-approved bonded debt add-ons, and general 2 percent annual cap on increases to base year value. https://www.boe.ca.gov/proptaxes/decline-in-value/
[7] San Mateo County Assessor-County Clerk-Recorder & Elections, "Homeowners' Exemption." Official county guidance stating that an owner-occupied principal residence may receive a $7,000 reduction in assessed value. https://smcacre.gov/assessor/homeowners-exemption
[8] California Legislative Information, "SB-1164 Bill Votes." Official vote page showing Senate floor passage on May 22, 2024 by a 29-6 vote. https://leginfo.legislature.ca.gov/faces/billVotesClient.xhtml?bill_id=202320240SB1164
[9] California State Board of Equalization, "Supplemental Assessments." BOE page explaining the supplemental roll, proration factor table, and warning that lenders do not receive supplemental bills. https://www.boe.ca.gov/proptaxes/supplemental-assessment/
[10] California Revenue and Taxation Code Section 65.1. Statutory provision stating that when a condominium unit is transferred, only the unit transferred and its appurtenant share of common area is reappraised; the increase is applied to the occupant of that unit only and not prorated to other units. https://california.public.law/codes/ca_rev_and_tax_code_section_65.1
[11] San Mateo County Tax Collector, "Supplemental Tax." County guidance on supplemental bill timing (within nine months of new construction), 60-day advance notice, and delinquency dates. https://www.smcgov.org/tax/supplemental-tax