What Is A Supplemental Tax Bill?
I receive many calls from clients’ months AFTER they purchase a resale home or new construction asking why they just received something called a Supplemental Tax Bill. A Supplemental Tax Bill is NOT your regular tax bill. So, what is a Supplemental Tax Bill and how do you deal with one?
Any time a home is sold, state law says that the county must re-assess the value of the property. Very simply, a Supplemental Tax Bill is put in place by taking the New Assessed Value of your property and subtracting the Old Assessed Value of that property (prior to you purchasing). For example, let’s say you purchased a $450,000 home in September. The old assessed value is $350,000. The difference is $100,000. That $100,000 is prorated based on how many months are left in California’s fiscal year (from July 1 through June 30). That would be 9 months or .75 (of the year). Multiply the $100,000 by .75, which equals $75,000. Multiply that by California’s 1% property tax rate = $750. That means you will receive a Supplemental Bill for $750 and you will pay that over 2 installments (usually different dates than your regular tax bill). A few things to note:
1) SUPPLEMENTAL TAX BILLS ARE A ONE TIME EVENT (unless you ultimately make improvements to the property OR you add or remove someone from title, which TRIGGERS a re-assessment of your value (this is a VERY IMPORTANT DISCUSSION and I will discuss EXCLUSIONS to re-assessments in next month’s article!)
2) If you have an impound account (also known as an escrow account) with your current lender, generally speaking, SUPPLEMENTAL BILLS will NOT be paid through that impound account. They should be paid by the homeowner separately because very rarely will there be enough in your impound account to take care of the Supplemental Bill AND not cause your impound account to go short. But you can contact your lender to discuss.
3) It can take the county 6-12 months to re-assess your property after you purchase it.
4) There can actually be NEGATIVE SUPPLEMENTAL BILLS, which happen when the NEW PURCHASE is LESS than the OLD ASSESSMENT. That happens, for instance, when a Senior Citizen, under a Prop 13 transfer, purchases a home or if there is a downward adjustment to assessment. These will include a refund check.
Should you have any questions about Supplemental Bills or lending in general, please contact me at 661-705-2500. Option 1. Rates are still at ALL TIME LOWS so if you have NOT refinanced recently, NOW is the time! I want to THANK the many NEW clients I have had the pleasure of refinancing who have called me simply because of these articles! I appreciate you ALL! Curt Kravitz is a direct lender with Bay Equity Home Loans and has over 3 decades of experience handling loans for Santa Claritans’.
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