What does building a casita do to your property taxes?

1. The question, as people ask it

"Will an ADU raise my property taxes?" — also asked as "Does a casita reset my assessed value?", "Will the county reassess my whole house if I add a guest house?", and "If I rent the casita, does my house become a rental for tax purposes?"

2. The short answer

Yes, a new ADU raises the taxable value of your parcel. How much depends on one threshold: whether the new construction is worth 15% or more of your parcel's full cash value.

• Arizona taxes your home on its limited property value (LPV), not its market value. In a normal year the LPV can rise only 5%: it is "the limited property value of the property in the preceding valuation year plus five per cent of that value" (A.R.S. § 42-13301(A)). The county calls this Rule A.
• New construction can break that cap. When property "has been modified by construction, destruction or demolition since the preceding valuation year such that the total value of the modification is equal to or greater than fifteen percent of the full cash value," the LPV is instead reset "at a level or percentage of full cash value that is comparable to that of other properties of the same or a similar use or classification" (A.R.S. § 42-13302(A)(3)). The county calls this Rule B.
• If the ADU adds less than 15% of the parcel's full cash value, the county's own policy keeps you on Rule A: the full cash value goes up, but the LPV keeps its 5%-a-year path.
• The LPV can never exceed the full cash value (§ 42-13301(B)).

3. Why you may have heard otherwise

"They reassess everything from scratch." Not unless the 15% test is met. And even under Rule B, the reset is to the county-wide ratio of LPV to full cash value for similar properties, not to full market value. The Maricopa County Assessor's policy describes the ratio as "percentages that are recalculated each year," found "by looking at the LPVs and FCVs of all properties with similar classification or use and determining the percentage of FCV that the LPV represents on these similar properties."

"A casita is taxed as its own parcel." No. LPV is set for the whole parcel: "Separate determinations shall not be made for the limited property value of land and for the improvements on the land in reference to property parcels" (§ 42-13301(C)). The Assessor policy repeats that a Rule A or Rule B must be applied to the whole parcel, not part of it.

"You'll see it on next year's regular notice." Often it arrives sooner. For new construction and additions completed after September 30 of the prior year and before October 1 of the valuation year, the assessor sends a supplemental notice of any change in valuation or legal classification "on or before September 30 of the valuation year," and the owner has twenty-five days to appeal to the State Board of Equalization in a county of 500,000 or more (A.R.S. § 42-15105).

4. The rental question

Whether you rent the ADU can change your parcel's legal classification, which drives the assessment ratio:

• Class three is residential property "occupied by the owner as the owner's primary residence," and it includes a primary residence where the owner "also uses the property for lease or rent to lodgers" (A.R.S. § 42-12003(A)(1), (3)).
• Class four includes residential property "solely leased or rented" (A.R.S. § 42-12004(A)(2)).

The statutes we read do not say how a parcel with an owner-occupied house and a separately leased ADU is classified. The Assessor's policy notes that a change "from primary residence classification to non-primary residence (rental classification) and vice-versa" does not by itself trigger a Rule B recalculation. Two separate consequences of renting are clear in the text:

• Registration. "An owner of residential rental property shall maintain with the assessor in the county where the property is located" the owner's name, address, and telephone number, the property's address and parcel number, and the year built; the property "shall not be occupied if the information required by this section is not on file" (A.R.S. § 33-1902(A), (C)).
• Short-term rental registration is not waived by the state STR statute (A.R.S. § 9-500.39(J)).

5. What's still unsettled

• How the assessor values a completed ADU. The full cash value assigned to the new improvement comes from the Assessor's cost and market models, which this page does not reproduce. There is no published per-square-foot figure to cite.
• Classification of a mixed parcel. Whether an owner-occupied house with a leased ADU stays wholly in class three, splits, or moves to class four is not answered in §§ 42-12003 and 42-12004 as we read them. Ask the Assessor before you sign a lease.
• The 10% figure in the ADOR publication. The Department of Revenue's Limited Property Value publication (effective October 1, 2015) says Rule B "must be used when any new construction equals ten percent or more of the prior valuation year's FCV." The current statute and the Assessor's 2019 policy both say fifteen percent. We treat the statute as controlling and flag the older publication.
• Rule B ratios. The county publishes the ratios yearly; we did not pull the current year's table.
• Tax rates. This page is about assessed value only. The tax bill also depends on each taxing district's rate, which changes yearly.

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• A.R.S. § 42-13301 (limited property value, Rule A): https://www.azleg.gov/ars/42/13301.htm
• A.R.S. § 42-13302 (modifications, omissions and changes, Rule B): https://www.azleg.gov/ars/42/13302.htm
• A.R.S. § 42-15105 (supplemental notice and appeal for new construction): https://www.azleg.gov/ars/42/15105.htm
• A.R.S. § 42-12003 (class three) and § 42-12004 (class four): https://www.azleg.gov/ars/42/12003.htm · https://www.azleg.gov/ars/42/12004.htm
• A.R.S. § 33-1902 (residential rental registration with the assessor): https://www.azleg.gov/ars/33/01902.htm
• Maricopa County Assessor, "Limited Property Value and Clarification of the B rule," policy AD-1009131637, v5 (8/27/2019): https://www.mcassessor.maricopa.gov/file/home/faq/Rule-B-Policy-Version-5-08-27-2019.pdf
• Arizona Department of Revenue, Assessment Procedures: Limited Property Value (eff. Oct 1, 2015): https://azdor.gov/sites/default/files/2023-03/PROPERTY_LimitedPropertyValue.pdf

This page reports what the statutes and the Assessor's published policy say. It is not tax or legal advice. Confirm your parcel's classification and valuation with the Maricopa County Assessor.

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