Supplemental Property Tax Bill
OK so you bought a house, you are all settled-in and then a couple of weeks later you receive in the mail a “Supplemental Property Tax Bill”. Your first words that come out probably will be… What the heck is this? Then you start thinking that you were told that all your property taxes are to be paid via your escrow impound account – mortgage holder/Lender (also known as an escrow account)…. and you also specifically remember being consulted that in addition to your monthly mortgage payment, one-twelfth of your annual property taxes is to be included in that monthly payment. Keep that thought as we continue along on this page OK ?
Note: You are not alone in receiving such a bill. Anyone who has purchased a home in any current year is subject to receiving one - this due to the value reassessment of your property upon purchase.
The receiving of a Supplemental Property Tax Bill can also happen to buyers who prior to closing escrow opted to pay their property taxes in 2-or-1 annual installments. So the Supplemental Tax Bill is not only just applicable to buyers who make monthly payments to escrow impound accounts.....An Escrow impound account is like a "bucket" where your monthly paid property taxes are held until the property taxes are due to be paid. The escrow impound account also pays the property taxes due in 2-or-1 annual installments. Either buyer chosen option is to pay property taxes directly to your local County Treasurer-Tax Collector.
So why are you getting this Supplemental Property Tax Bill?
California Property Tax Law (Civil Code section 1102.6c) requires your local County Assessor to re-value real property at the time the ownership of the property “changes hands”. The “new” taxable/assessed value is now the recorded sales price that you and the seller agreed to. This sales/purchase price is recorded in the county records and this amount becomes the new base value of which your future annual property taxes are calculated.
Supplemental tax bills are mailed directly to the property owner and are the owner’s responsibility. In general, the escrow impound account holder/lender is not notified of the recently issued Supplemental Property Tax Bill to the buyer. Again it is the owner's responsibility and is not paid out of your escrow impound account "bucket".
Having said that: While you and seller were going through the escrow process, the assessed value that Escrow utilized is the value that is now considered the “old” assessed value which your seller was paying property taxes on. Now that your Escrow has been closed and the property has “changed hands”, the supplemental property tax bill in this case is the taxed difference between the “old” assessed value and the “new” assessed value (ie: sales/purchased price).
If the property is re-assessed at a higher value than the “old” assessed value, a supplemental bill will be issued/mailed to you. If the property is re-assessed at a lower value than the old assessed value, a refund may be coming your way.
How many Supplemental property tax bills am I to get ?
Because of this law in regards to a re-assessment after change of ownership, you (the new homeowner) may receive one or two supplemental property tax bills within the same year after Escrow has closed.
What if I do some upgrading / remodeling to my home ?
Simply know that you may be responsible for paying supplemental property taxes if you have added any value to your home, such as new construction, upgrading and/or remodeling.
The permits for remodeling or for new construction are also recorded at the County Recorder’s Office. This in itself gives notice to the County Assessor’s office that value has been added to your home. In this case, an assessor’s will more-than-likely reassess your home and you may receive a Supplemental Property Tax Bill for the added value.
Can I write-off supplemental property taxes paid?
YES - you can deduct any property taxes paid during the year that apply to your period of ownership. Just lump-together the amount of supplemental property taxes paid with the regular property tax paid… cannot get any simpler than that !
Is there supplemental taxes due if I refinance ?
A "refinance" loan is not a sale because the property is not changing hands. So refinancing your mortgage loan won't cause your property taxes to change nor will there be a Supplemental Property tax bill sent to you.
Whether you are a Seller or Buyer, my experience tells me that you may have a question or two.... and if by chance you do, always know that I will certainly make it a point to make myself available for you. Contact me anytime.
Oscar Castillo : Broker Associate (San Diego, CA)
- Residential Brokerage