California properties are among the more desirable in the nation, which can drive the median value of homes up considerably compared to other states. For homeowners, this is often a dream come true, and a big part of why people choose to live and invest here in the sunshine state.
What are Supplemental Property Tax Bills?
So, if you’re purchasing a new home, you can expect what’s called a ‘supplemental tax bill,’ which is issued to close the discrepancies between previous tax rates and the new tax rate based on the most current assessment. Supplemental taxes are levied on property as it exists on the date of the change in ownership or completion of new construction in accordance with Article XIII A of the California Constitution Supplemental taxes represent the additional taxes due for an increase in the assessed value resulting from an ownership change or new construction . It is generated whenever a property is reassessed due to a change in ownership (a sale, transfer, or transfer of fractional interest); or undergoes new construction. If you purchased the property for less than the previously assessed value, you may receive a supplemental tax refund.
If you’re planning to purchase, you need to calculate what you might expect to pay in supplemental taxes so you’re not caught unaware with unexpected expenses when it arrives in the mail.
The supplemental roll provides a mechanism for placing property subject to Proposition 13 reappraisals due to change in ownership or completed new construction into immediate effect. Changes in ownership or completed new construction are referred to as 'supplemental events' and result in supplemental tax bills that are in addition to the annual property tax bill.
The increase (or decrease) in assessed value resulting from the reappraisal is reflected in a prorated assessment (a supplemental bill) that covers the period from the first day of the month following the supplemental event to the end of the fiscal year. A fiscal year runs from July 1 through June 30.
How do Supplemental Property Tax Bills work?
Supplemental Property Tax Bills are prorated from the date of the transfer or completion of new construction to the end of the tax year (June 30). If you purchased a property for more than the previous owner’s assessed value, the Supplemental property tax will be calculated based on the change in value and prorated from the date the purchase occured through the end of the fiscal year (June 30). The box on the bill noted “Days Owned” provides the time period for which you are being assessed. Carefully review the dates in this box and the information provided in the “Assessed Supplemental Values” box.
The Supplemental Property Tax Bill is in addition to the annual Secured Property Tax Bill. Both bills must be paid by their respective due dates to avoid late penalties.
The supplemental tax becomes effective on the first day of the month following the month in which the change of ownership or completion of new construction actually occurred. If the effective date is July 1, then there will be no supplemental assessment on the current tax roll and the entire supplemental assessment will be made to the tax roll being prepared which will then reflect the full cash value. In the event the effective date is not on July 1, then the table of factors represented on the following panel is used to compute the supplemental assessment on the current tax roll.
When do Supplemental Property Tax Bills have to be paid?
The date on which Supplemental property tax bills become delinquent varies depending upon when they are mailed by the Treasurer-Tax Collector. If the bill is mailed between July 1 and October 30, the taxes become delinquent on December 10 for the first installment and on April 10 for the second installment (the same delinquency schedule as for annual tax bills, except where the due date falls on a weekend or legal holiday then it would be due the next business day). If the Supplemental property tax bill is mailed between November 1 and June 30, then the first installment is due the last day of the month following the month in which it was mailed. The second installment is due the last day of the 4th month after the first installment was due. Late penalties and fees are applied for all delinquent Supplemental property tax bills.
What are Unsecured Supplemental Property Tax Bills?
The term “Unsecured Supplemental” refers to an assessment that is based on prior ownership of Secured property. For example, an Unsecured Supplemental assessment will be issued to a homeowner who owns or inherits a property and re-sells it before the Office of the Assessor has issued a Secured Supplemental property tax bill. Unsecured Supplemental property taxes will have varying due dates based on the issuance of the assessment by the Assessor.
Supplemental Tax Estimator: https://tax.ocgov.com/tcweb/ttc_tmpl_1.asp
Will my taxes be prorated in escrow?
No, unlike your ordinary annual taxes, the supplemental tax is a one time tax which dates from the date you take ownership of your property or complete the construction until the end of the tax year on June 30. The obligation for this tax is entirely that of the property owner.
If you are impounding your tax payment into your monthly payment supplemental tax bills can be particularly disruptive. Your lender will receive a copy of the original tax bill but will not receive a copy of your supplemental bill.
If the homeowner does not forward the supplemental property tax bill onto the lender, the lender will not be aware of the additional taxes owed and may inaccurately lower or adjust your impound account. This may result in the lender not adequately collecting enough taxes and then raising your impound account drastically in the future.
The best way to handle all supplemental tax bills is to immediately contact your lender to make them aware of the additional taxes owed so they do not incorrectly adjust your future payments.
You don’t have to become a property tax expert to buy a house. The most important part of the process is knowing you can trust the professionals involved in the process – from your real estate agent to your mortgage company to your tax specialist. They will deal with the nitty gritty, and make sure your best interest is represented.
Even so, it’s important to understand the fundamental aspects of your personal finances so you can feel confident about every step of the process, and know you’re setting yourself up for a bright financial future in a gorgeous home!
If you have questions about the process of buying a home, or the particular property tax details of your transaction, feel free to drop us a line. We’re here to help.
SOURCES: https://www.pointequity.com/blog/how-do-property-taxes-work-in-ca, https://www.octreasurer.com/faq/supplemental-property-taxes#:~:text=Property%20taxes%20under%20Prop.,issuances%20and%20Mello%2DRoos%20charges., https://www.titleadvantage.com/mdocs/SuppPropTax.pdf, https://tax.ocgov.com/docs/Supplemental_FAQ_Insert_2016.pdf, https://www.boe.ca.gov/proptaxes/supplemental-assessment/, https://www.clta.org/page/Consumer13,