If you expand your home to provide living quarters for your parent or grandparent, you may be eligible for the granny flat exemption. This exemption lets Homesteaded property owners exclude all or part of the value of the addition from your home’s assessed value.
What is a granny flat?
An addition to an existing home for the purpose of providing living quarters for your parent or grandparent is commonly called a granny flat. A granny flat might be a room addition, a larger attached addition, or something like a mother-in-law suite.
Why is the granny flat exemption important?
Normally, when you make additions to your home, it will increase your home’s total assessed value. This, in turn, increases your property taxes.
Remember that even if you qualify for Save Our Homes, it only applies to your current home. If you make improvements, the property appraiser will add the full value of those improvements to your home’s assessed value.
For example, your home might be valued at $100,000 in one year. The next year, its assessed value can’t be more than $103,000 since Save Our Homes limits increases to 3%. However, since additions get added in full without the limit, an addition that increases the value of the property by $25,000 means your assessed value for next year can be $128,000.
The granny flat assessment reduction offsets some or all of that increase.
How much is the granny flat exemption?
The maximum reduction allowable is the smaller of:
- The increase in your home’s value due to the additions
- 20% of your home’s value after improvements
Keep in mind that the increase in value does not necessarily mean the cost of construction. It’s the increase in the cost your could sell your home for after the improvements. Additionally, the property appraiser’s office often uses different calculations than a Realtor might.
Here are some examples starting with a $100,000 home.
- $10,000 increase in value to $110,000. 20% of the new value is $22,000, but you can only exempt the $10,000 increase.
- $50,000 increase in value to $150,000. 20% of the new value is $30,000. Since you take the smaller of the two numbers, you exempt $30,000 rather than $50,000.
What are the eligibility requirements for the granny flat exemption?
To qualify for the granny flat assessment reduction,
- The property owner must have received the Homestead exemption.
- The parent or grandparent living on the property can’t be an owner. (There are steps you can take with the help of an estate planning lawyer to ensure they can remain in the home if something happens to you.)
- The parent or grandparent must be age 62 or older as of January 1st.
- The parent or grandparent can’t have a Homestead exemption or other residency-based benefit elsewhere.
- The living quarters to be exempted must be new construction or reconstruction completed after January 7, 2003.
- The improvements must meet local regulations, such as being properly permitted.
How do you apply for the granny flat exemption?
Visit your local property appraiser’s office or their website to apply. The exact process may vary by county.
Granny flat applications are typically due by March 1st for property tax bills sent in the fall. If you missed the deadline, contact your property appraiser’s office to see if you can get an exception.
Do you have to renew the granny flat exemption?
Some places require you to apply each year. Others automatically extend your exemption.
What happens if your parent or grandparent moves out or you no longer meet other requirements?
You must immediately notify your property appraiser if your parent or grandparent moves out or if you no longer meet other requirements. Even if your tax collector requires you to reapply annually, you still generally have an obligation to notify them as soon as your eligibility changes.
What happens to your exemption amount when you lose the exemption?
When you lose the exemption, the exemption is added back to your property’s assessed value. For example, if you had a $25,000 additional exemption, your assessed value will increase by $25,000.
What are the penalties for receiving the exemption when you’re not eligible?
If you receive an exemption that you’re not eligible for, the penalty is 50% of the unpaid tax plus 15% annual interest. The property appraiser can go back as far as ten years.
Where can you get help with this?
Your local property appraiser can help you with general information and the application process.
If you have questions about whether your planned upgrades will qualify as “reconstruction” or don’t agree with your home’s new assessed value, contact a local property tax lawyer.