You just bought your dream home, you think all bills have been accounted for and then up to nine months after your purchase a new bill comes in the mail titled, Supplemental Tax Bill.
Talk about an unpleasant surprise.
What is a supplemental property tax bill and why do you have to pay it?
Supplemental Taxes are additional secured taxes that are due to the County Assessor because of the new value of the property that has occurred from the purchase or new construction on the property.
How are the Taxes Calculated?
At the beginning of each year on January 1, the County Assessor reviews your property and determines its value. This becomes the basis for which your Property Taxes (secured tax lien) are calculated by. When a property’s ownership changes, or new construction exists, the property is reassessed upon completion of the transaction, or new build. The reassessment can happen immediately or several months after and becomes the basis for your Supplemental Taxes to be calculated by. The new amount due reflects the taxes due on the difference between the old value and the new value determined by the County Assessor. It is then adjusted by proration to account for the number of months left in the fiscal year.
What is the Fiscal Year?
In many cities the fiscal year begins on July 1 and goes through June 30 of the following year. This fact can make it confusing for many new home owners as you may receive two supplemental tax bills instead of one, depending on the date of purchase, as it may effect two fiscal years. For example, if you buy your home in February of 2016 your first Supplemental Tax bill will be calculated for the months of February – June of the 2015-2016 fiscal year. You will then receive a second Supplemental Tax bill for the remaining months of 2016 (July – December). Once January 1, 2017 hits your property will be reassessed by the County Assessor with no future Supplemental Tax bills until something on your property changes, i.e. new ownership or new construction.
Secured Tax Liens aka Property Taxes
In determining the amount of your Secured Tax lien (Property Tax levied against your house by the County Assessor) the County Auditor applies the tax rate to the assessed value of your property. With the passing of Propositions 13 in 1978 in California, the maximum ad valorem tax allowed is one percent (1%) of the full cash value of the property. There is then voter approved debts added to pay for items such as school districts, and special districts. The voter approved debts are also known as Mello-Roos districts. These districts allow for a special property taxes on real estate. The monies accrued in Mello-Roos districts are used for public services such as streets, sewage and drainage, infrastructure, schools, parks and police protection. These special tax rates are added to the property tax for each property. For more information on how the additional tax rates are calculated in San Diego County click here.
It is important to note, failure to pay your Supplemental or regular Property Taxes in full can result in penalties, fees, fines and even the forced sale of your home. Make it a point to look out for your Property Tax bills and pay by the due dates. To avoid penalties make sure your payment is U.S. Post marked – this is different than your home postage machine stamp – by the due date.