The Supplemental Real Property Tax Law was signed by the Governor in 1983 and is part of an ambitious drive to aid California’s schools. This property tax revision produces over $300 million per year in revenue for schools.
A supplemental tax bill is for additional charges not covered by the annual tax bill. Supplemental tax bills are mailed directly to the homeowner and are generally not paid out of the escrow account.
Under current California law, after there is a change of ownership to a home, the property is reassessed for its value. When the assessed value changes, the County must recalculate the property taxes, and when those change, they send the new owner a supplemental tax bill.
The supplemental bill covers the difference between the previously assessed value taxes and the newly assessed value upon purchase of the home. Think of it as a “catch-up” bill.
A homeowner may also receive a supplemental tax bill for changes that add to the property value, like adding square footage.
To calculate the bill, subtract the home’s old value from the new market value based on the reassessment. The new tax rate is applied to the difference (prorated by the amount of time left in the fiscal year ending June 30th) to get the supplemental tax total.
Again, it’s important to note that this bill does not get sent to the mortgage servicer, as they only receive your annual property tax bill.
This is a bill that is separate from what gets paid out of the regular escrow account (assuming a borrower is impounding their property taxes), so it is important to set aside funds specifically to pay this bill.
The frustration about a supplemental tax bill is that almost all buyers have forgotten about it by the time it comes in the mail, as it will take six to nine months for the new homeowner to receive. The good news is supplemental property tax payments are deductible.
*Disclaimer: If the supplemental tax bill is not paid by its delinquent date, the homeowner will be charged a 10% penalty. A late charge is added if the second installment is also late. If neither installment is paid by June 30th, the property will go into “tax default,” and the owner will be charged a 1.5% penalty per month. An additional redemption fee will also be added to the bill, so it is important to be punctual when it comes to paying this tax bill.
If you have any questions regarding supplemental taxes, or any extra costs associated with purchasing a home, give us a call at (760) 930-0569 and one of our loan officers will assist you.