Will a Home Addition or ADU Raise My Property Taxes in Collin County?

You have the addition sketched out or the backyard ADU priced, a construction number in mind — and then the quiet question lands: is this going to raise my property taxes? For Collin County homeowners the honest answer is yes, but how much, and how the 10% homestead cap fits in, catches almost everyone off guard. Here is exactly how a permitted addition or ADU moves through the appraisal system, what gets taxed, what does not, and how to budget for the cost that shows up every year — not just at closing.

Does a home addition raise property taxes in Texas? The short answer

Yes. Building an addition or an ADU raises your property taxes because it raises the one number your entire tax bill is built on: your home's appraised value. Texas has no state property tax — your bill comes entirely from local taxing entities. Each January 1, the Collin Central Appraisal District (Collin CAD) sets a market value for every property in the county, as the Texas Property Tax Code requires. Your bill is that value, after exemptions, multiplied by the combined rate of your overlapping taxing units — typically your school district, your city, Collin County, and Collin College.

Add permitted, finished square footage and you add market value, so the bill goes up. The nuance that trips people up is the 10% homestead cap, which changes how much and how fast that increase reaches you.

From permit to appraisal: how the county finds your addition

There is a direct pipeline between the permit you pull and the appraisal notice that arrives the following spring. It runs like this:

• You pull a permit. Every Collin County city — Allen, Plano, Frisco, McKinney — runs its own permitting process, and an addition or ADU that adds square footage always requires one.
• Collin CAD sees it. The district lists building permits among the tools it uses to locate new construction, alongside physical inspections, building plans, and aerial imagery. A pulled permit puts your project on the district's radar.
• It is valued as of January 1. Collin CAD appraises property at its condition on January 1. If your addition is finished — or even partway up — by that date, its value, or a portion of it, can land on that year's roll.
• You get a notice. Collin CAD mails a Notice of Appraised Value when a property's value rises by $1,000 or more. Read it closely — it shows your new value and your protest deadline.
• You can protest. The deadline is May 15, or 30 days after the notice was sent, whichever is later. If the district's estimate of your addition looks too high, you can challenge it.

The homestead cap: what it protects — and what it does not

The 10% cap in plain terms

If the home is your primary residence and you have filed for the homestead exemption, Texas Tax Code Section 23.23 caps how fast your appraised value can climb. No matter how hot the market gets, your appraised value in any year cannot exceed the sum of:

• last year's appraised value, plus
• 10% of last year's appraised value, plus
• the market value of all new improvements.

The cap takes hold in your second year with the homestead exemption, and it resets to full market value only when the home changes hands. That is why long-time owners in Allen or Plano often carry a taxable value well below what their house would sell for.

Your addition rides on top of the cap

Look again at that third line: plus the market value of all new improvements. That is the catch. The cap holds down your existing house, but the market value of the new square footage is added on top of the capped number — not shielded by the 10% limit at all.

Texas defines a new improvement as one made after the last appraisal that raises market value and was not already counted, and it specifically excludes repairs and ordinary maintenance. A room addition, a second story, a garage converted to living space, an ADU, and a new pool are all new improvements. Repainting or replacing a roof with like-for-like materials are not.

Two things are worth knowing here:

• It is a one-time step-up, then it is capped too. The year your addition is captured, its full market value is added. After that, it folds into your capped base and rises no more than 10% a year, like the rest of the house.
• Improving your home does not blow your cap. This is the fear we hear most, and it is wrong. Building an addition does not reset your whole house to market value — only the new square footage is added. Your cap resets when you sell, not when you build.

One exception cuts the other way: if the property is not your homestead — a rental, a second home, or a house you have not yet filed the exemption on — there is no 10% cap at all, and the addition simply adds to a market value that already has no brake on it.

Additions vs. ADUs: taxed the same, with a zoning asterisk

From a property-tax standpoint, an ADU — a garage apartment, a casita, a detached guest house — is treated like any other addition: it is finished, conditioned square footage, so its market value is added to your appraisal. Whether it is attached or standing on its own in the backyard does not change the tax math.

What does differ is zoning. Some Collin County cities restrict ADUs — McKinney, for instance, does not permit them by-right in most single-family zones — a question of building permits and land use that is separate from the tax question. But once an ADU is permitted and built, the appraisal treatment is the same as a room addition.

Two footnotes worth flagging:

• Renting it out. If you rent the ADU as a separate household, the portion you rent may not qualify for your homestead exemption or cap. Confirm with Collin CAD or a property-tax professional before you count on rental income.
• Pools count too. A pool builder quotes you a construction price; the finished pool is also a new improvement that adds to your appraised value — one more reason a project's true cost is bigger than any single trade's number.

Putting real numbers on it

Estimating the tax impact is a two-step calculation:

1. What value does the district add? Collin CAD assigns its own estimate of the market value your project contributes, which can differ from what you spent — and which you can protest if it looks inflated.
2. Multiply by your combined rate. Across Collin County cities, combined tax rates generally land a little under to right around 2% of taxable value — a typical Plano homeowner faces roughly 1.7% across the school district, city, county, and college. Your exact rate is on your tax statement and your Collin CAD account.

Here is how that shakes out on a few realistic figures (illustrative — use your own rate):

Market value the district adds	At ~1.7%	At ~2.0%
$75,000 (modest addition)	~$1,275 / yr	~$1,500 / yr
$150,000 (large addition)	~$2,550 / yr	~$3,000 / yr
$250,000 (major addition or ADU)	~$4,250 / yr	~$5,000 / yr

One piece of good news is baked into current law: the school-district homestead exemption rose to $140,000 in 2025 after Texas voters passed Proposition 13, up from $100,000. But that is a flat reduction off your school-taxable value — it does not grow to cover new square footage, so your addition is still taxed on top of it.

What will not raise your taxes (much)

Because the law excludes repairs and ordinary maintenance from the definition of a new improvement, a lot of common work does not get bolted onto your cap:

• Re-roofing with like-for-like materials
• Exterior and interior repainting
• Replacing a water heater or an HVAC system
• Swapping fixtures, flooring, or countertops without changing the footprint

Interior remodels that stay within your existing walls — a reworked kitchen, an updated primary bath, even a whole-home renovation that never grows the footprint — can raise your home's market value, but they generally stay under the protection of the 10% cap rather than being added on top the way new square footage is. A substantial, beyond-maintenance upgrade can still be picked up, so it is not a hard rule. But the single biggest tax lever, by a wide margin, is added conditioned square footage — which makes the planning takeaway simple: a remodel inside your current footprint is gentler on the tax roll than an addition that grows the house.

Plan for the carrying cost, not just the build

The mistake we watch homeowners make is not building the addition — it is budgeting only the construction number and forgetting the permanent line item that comes with it: a higher tax bill, and usually a higher insurance premium, every year they own the home. On a $150,000 addition, that is roughly $2,500 to $3,000 annually, indefinitely — which does not make the project wrong, just better-informed.

This is the whole-picture view a general contractor is meant to bring. A single-trade contractor quotes their slice and moves on. A design-build general contractor helps you see the entire cost of ownership — construction, permits, soil and drainage, and carrying costs like taxes and insurance — before you commit, so nothing is waiting to surprise you on next spring's appraisal notice.

Build with the whole cost in view

An addition or ADU is one of the best ways to get the space you actually want without moving — and understanding the tax side up front is simply part of doing it well. The Remo Guys is an insured and bonded design-build general contractor based in Allen, building across Collin County — Plano, Frisco, McKinney, Prosper, and beyond — since 2019. We will walk your project end to end, from design and permits to the final build, and give you a clear-eyed picture of the whole cost, carrying costs included. Request a consultation and let's map it out together.