Supplemental Property Taxes: what are they?
Have you ever heard of the term “Supplemental Property Taxes”? Let’s face it, home-ownership comes with an abundance of new questions and terminology. Let us help you understand this matter in simple terms by providing information and answers to frequently asked questions.
Supplemental Property Taxes have been around since 1983, but what are they? Our past Governor, Jerry Brown, introduced The Supplemental Real Property Tax Law as part of an aid to California’s schools. He estimates this property tax revision to produce over $300 million/year in revenue for schools. If you purchased your property within the last 12-15 months, chances are, you will be receiving a supplemental tax bill from your county’s Tax Collector’s office for the additional tax liabilities due to a reassessment of property values. Supplemental Taxes are different than Annual Property Taxes and if you are a new homeowner, it will effect you and your property.
This bill typically comes a few months to a year after the close of escrow. Please note that it’s a one-time bill and your mortgage impound account typically does not pay for this. You will need to pay for it out-of-pocket. Please check the supplemental delinquent dates to be sure to pay the taxes in a timely manner.
Here is an example
Simply put, when escrow closed, you only paid your portion of this year’s property tax based on previously assessed value. For example, if the home’s previous assessed value was $300,000 and the tax rate was 1.2% at closing, the county was not aware of the new value. However, you might have purchased the home for $500,000, which means that you ought to have paid $500,000 x 1.2% instead. We all know that it takes the city and county quite some time to complete tasks. Due to delays in value assessment, they usually send out the “supplemental bill” after they catch up. The bill simply represents the difference ($500,000 – $300,000) x 1.2% = $2,400. This is your prorated bill.
How will this affect me?
If you didn’t purchase new property or undertook any new construction, this tax will not affect you at all. However, if you did either one, you will be required to pay a supplemental property tax, which will then become a lien against your property. This will be in effect as of the date of ownership change or the date of completion of new construction. Here is Alameda County’s official explanation of Supplemental Property Tax. Other counties are similar.
When and how will I be billed?
To predict “when” you will be billed would be a tough task to do as it will depend on each individual county, the workload of the County Assessor, the County Controller/Auditor and the County Tax Collector. The assessor will appraise your property and let you know of the new amount. You will then have the opportunity to discuss your valuation, apply for a Homeowner’s Exemption and be informed of your right to file an Assessment Appeal. The County will then calculate the amount of the supplemental tax and the tax collector will mail you a bill. The supplemental tax bill will illustrate; the amount of the supplemental tax, date on which the taxes will become delinquent, and other important details.
Do I have to pay my Supplemental Tax Bill all at once?
Fortunately, you are able to pay in two equal installments on specified dates depending on the month. See payment schedule as follows:
- July through October: the first installment becomes delinquent on December 10th of the same year. The 2nd installment becomes delinquent on April 10th of the following year.
- If the bill is mailed within the months of November through June, the first delinquent on the last day of the month following the month in which the bill is mailed. The 2nd will become delinquent on the last day of the 4th calendar month following the date the first installment is delinquent.
How do they determine the amount of my bill?
There is a formula that they follow and it will be prorated based on the number of months remaining until the end of the tax year, which is on June 30th. Unlike annual taxes, the supplemental tax is a one time tax which dates from the date you take ownership or complete the construction until the end of the tax year on June 30th.
Still have questions?
Luckily, we work closely with agents from First American Title. Give me a call or shoot me a quick email so that I can look over the bill, check their math, and appeal if I find any errors. Consultations are free and I would love to help!
