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Hilary Harrison
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  • North Charleston, SC
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Tax Rate on ADU when main house in owner occupied - N. Charleston

Hilary Harrison
Pro Member
  • New to Real Estate
  • North Charleston, SC
Posted Aug 30 2021, 06:17

Hey All!

Hoping someone may be able to help me with this question. I'm fairly new to real estate investing and recently bought a house in the Park Circle area of North Charleston. The house has an ADU, and the ADU currently has a tenant. I live in the main house. I assumed that since this property qualified as a single family residence and I'm living in the main house with it being my primary residence that the tax rate would be the primary 4%. However, I just got the Charleston County's assessment letter and it shows that the main house is taxed at the 4% and the ADU on the property is taxed at 6%, with the entire value of the home being split between the two structures.

Does anyone happen to know if this is accurate? I'm assuming it is, but was surprised to find I'd have two separate tax rates - one at the primary rate and one at the rental rate. I thought I'd just have one tax rate for everything at the 4%.


Thank you!

Hilary

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Will Gaston
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  • Rental Property Investor
  • Columbia, SC
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Will Gaston
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  • Rental Property Investor
  • Columbia, SC
Replied Aug 30 2021, 07:48

@Hilary Harrison I believe in Columbia (Richland County) this would likely be pro-rated based on the SF and/or the value.

What are the SFs of both the main house and the guest house?

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Hilary Harrison
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  • New to Real Estate
  • North Charleston, SC
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Hilary Harrison
Pro Member
  • New to Real Estate
  • North Charleston, SC
Replied Aug 30 2021, 09:17

Thanks, @Will Gaston! That was my thinking as well. There's a discrepancy between the city records and the appraisal on sq. footage. Our appraisal says the main house is 1,140 and the ADU is 525 sq. ft. The records show the main house to be 1,740 and the ADU to be 400 sq ft. Quite the difference and I'm not positive which is right, but I think the appraisal is.

Thanks for your help!

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Jacob D Adamczak
  • Charleston, SC
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Jacob D Adamczak
  • Charleston, SC
Replied Aug 31 2021, 06:02

@Hilary Harrison Charleston county charges 4% on owner occupied primary residences (your house) and 6% on any non owner occupied structures or second homes. If you rent out your ADU, it would be taxed at the higher 6% rate and your primary residence will be taxed at 4% despite them both being on the same piece of land. Also, it should be fairly easy to determine the square footage by measuring the length and width of the ADU and multiplying them. If they are taxing you at the 6% for 100 additional square footage, I would try to get that adjusted so you don't overpay.

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Troy Gandee
  • Real Estate Broker
  • Charleston, SC
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Troy Gandee
  • Real Estate Broker
  • Charleston, SC
Replied Sep 4 2021, 04:44

@Hilary Harrison The previous owner was probably using the ADU as an STR. In most cases, you'll get 4% on the entire property if it's a longterm tenant. This is normally the care with single family with ADU and multifamily up to 4 units. We have an STR in an ADU in our house in PC. I put ours under another rental LLC business license a few years ago. When I did that, the county came out and measured the ADU and then taxed that % of my gross property area at the 6% rate because it was an Airbnb. If you don't intend to Airbnb it, you can call the assessor's office and they'll likely change it back to 4%. They may want to see a copy of the lease. If you plan to Airbnb, you'll probably be stuck at the 6% ratio for that portion of the property. Also be aware that the City of N Charleston is finally in the process of coming out with some regulations. They have a public hearing about in a week or so. Most of the regulations are pretty reasonable, but will need to be tweaked to be fair and agreeable with hosts.

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Hilary Harrison
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Hilary Harrison
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  • New to Real Estate
  • North Charleston, SC
Replied Sep 13 2021, 14:50

Thanks, @Jacob D Adamczak and @Troy Gandee for your responses! I really appreciate the help. Our ADU has a long-term tenant, so it sounds like I should be able to show the lease and inquire at the assessor's office about decreasing the tax rate to 4% then (thank you for the tip on that, Troy!). It may be that it's at the 6% rate because the tenant was month-to-month with the previous landlord. We had planned to rehab the unit and Airbnb it at some point, but we aren't at that stage just yet. I heard about the City of N Charleston's potential regulations on short-term rentals set to be heard tonight. Like you, some of it seems fair to me, while I hope they tweak other parts. I'm not a big fan of the potential rule around only being able to Airbnb one unit per lot given my situation with a house and ADU. Since you're in PC, Troy, maybe we'll have a chance to connect in-person at some point! I've lived in PC for 7 years and have another rental in PC (in OTP). Love this area!

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Troy Gandee
  • Real Estate Broker
  • Charleston, SC
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Troy Gandee
  • Real Estate Broker
  • Charleston, SC
Replied Sep 14 2021, 03:39

@Hilary Harrison You may want to be careful trying to get that 4% on the ADU still. You're not technically supposed to have a long term tenant in an ADU in most cases. An ADU is generally supposed to be for personal or family use. A long term tenant usually means it's a different "family" and should have a separate meter in order to be a legal unit that can be leased to a separate individual. They could give you a hard time. It will depend on your zoning, but they normally require a separate power meter for the ADU to be capable to renting long term to a traditional tenant.

Apparently the zoning board's proposal passed last night. I couldn't make it because we're just getting out of Covid quarantine. That same set of regulations goes to city council next. 

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Hilary Harrison
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Hilary Harrison
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  • New to Real Estate
  • North Charleston, SC
Replied Sep 21 2021, 13:47

Thanks for the heads up, @Troy Gandee, as I didn't realize that about most ADUs needing to be used for family/personal use in the area. The ADU we have does have a separate power meter and everything. We're in old Park Circle. I'll continue digging into the regulation around them as it's not super clear cut to me. Thanks again!

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Troy Gandee
  • Real Estate Broker
  • Charleston, SC
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Troy Gandee
  • Real Estate Broker
  • Charleston, SC
Replied Sep 21 2021, 14:04

@Hilary Harrison You're in good shape then. A separate meter is generally considered a separate unit distinct from the primary home, so it can usually be rented long term with no issues. The ADU is kind of in the name, "accessory" usually means used an accessory to the dwelling occupied by the homeowner.