Oregon Department of Revenue Returns ADU Taxation to Reason

Abe Park Blocks

This has been a nerve-racking  year for homeowners considering building an ADU on their property. But two developments have turned that around making it the best time to build an ADU. First, the SDC Waiver was set to expire on 7/31/2016 but was recently extended, extending the waiver period to 7/31/2018. Then there was the Tax Scare of 2015 when reports from some homeowners in Multnomah County discovered, to their horror, that the ADU they had just built and were excited to start renting was about to cost them thousands of dollars in unanticipated increased taxes. This tax hike was triggered by a sudden shift in how Multnomah County viewed these new additions, which allowed them to reset the Maximum Assessed Value of a property.

With a county-wide sigh of relief, that policy has now been reversed by the Oregon Department of Revenue. In what can only be described as an act of reasonable thinking, this “loophole” has been closed by simplifying the way ADUs will be taxed. This reduces the risk by making the taxes predictable and significantly lower than during the scare.

To read about this in more detail go over to AccessoryStructures.org to read friend of SQFT Studios Kol Peterson’s take on this news and access to the documents that have been drafted and proposed for public review.

The updated and simplified equation for determining your Tax Liability from a new ADU is:

Assumed ADU Value x 0.014 = new per year increase in property taxes.

Example: $100,000 ADU, the property taxes would be $1,400 per year.

Simple, and much easier to stomach than $3,000-$4,000 increases we saw during the scare.

Three cheers for the cool heads at the Oregon Dept. of Revenue!