Are you one of the 77% of U.S. adults who takes some form of nutritional supplement? If so, you’ve contributed to the estimated $31 billion dollars of revenue that this industry generated in 2018. So it stands to reason that California counties would want in on the supplemental action and they’ve figured out just the way to do it…
Seriously, taking on home ownership for the first time is a big responsibility. And since many first time buyers are coming from a background of paying rent, it’s important that we, in the mortgage industry, educate them about how making a monthly rent payment differs from coming up with the new housing payment once the home is yours. Specifically, buyers are no longer just responsible for their “payment,” meaning the rent or mortgage payment, but once owners, they also shoulder the responsibility of homeowners insurance premiums and property taxes. We’re going to focus on the tax piece and we’re going to take it a step further and detail what you need to know about supplemental property tax bills in California.
(Trying to) Keep It Simple
When you buy a home in California, your property tax rate will be determined, in part, by the price you pay for the home. If you’re buying a previously owned home, this was also true for the seller, though the seller’s tax basis will almost certainly be different than yours. Supplemental taxes effectively adjust the seller’s tax basis to yours, as the buyer, and a separate bill is often issued to “catch up” the new basis with the previous one. Let’s use a rudimentary example. If the seller paid $800,000 for the home five years ago and had a 1.25% property tax rate, his annual tax bill is $10,000. If you buy the home for $1,000,000 and the tax rate is the same, your annual taxes will be $12,500. Again, being overly simplistic, a $2500 supplemental bill will be issued to you, the new buyer, in the first year.
When Is a New Buyer Billed for Supplemental Taxes?
“When” is not easy to predict and will depend on the individual county. After your purchase, the County Assessor will appraise your property and advise you of the new supplemental assessment amount. Bear in mind that the assessed value is usually neither the same as your lender’s appraisal value nor the price you paid for the home, though the latter is part of what drives the tax basis going forward. Before the supplemental bill is issued you can appeal the Assessor’s assessment and, if you will occupy the home, apply for a Homeowner’s Exemption, which will lower your basis slightly. The bill, once issued will indicate the amount owed and the date the taxes will become delinquent.
When and How Do I Pay My Supplemental Taxes in California?
All supplemental taxes are payable in two equal installments. The taxes are due on the date the bill is mailed and are delinquent on specified dates depending on the month the bill is mailed as follows:
- If the bill is mailed between July and October, the first installment becomes delinquent on December 10th of the same year. The second installment becomes delinquent on April 10th of the next year.
- If the bill is mailed between November and June, the first installment becomes delinquent on the last day of the month following the month in which the bill is mailed. The second installment becomes delinquent on the last day of the fourth calendar month following the date the first installment becomes delinquent.
A very important item to note is that supplemental taxes are most often the responsibility of the homeowner EVEN IF the owner has an impound/escrow account for their “regular” property taxes. So all those who have a VA or FHA loan, take note. Yes, your loan’s servicer may contact you regarding the supplemental bill and may provide options on how to pay them most efficiently given your servicing arrangement, but barring any notice or contact, the supplemental taxes are your responsibility and are IN ADDITION to your regular property taxes being handled through your mortgage payment. And remember, supplemental taxes are only applicable to the first year of ownership. Thereafter, the basis correction is factored into the regular tax bills and you will only continue to receive those. In CA, the regular bills are issued in October, technically due November 1 for the first installment, with a late date of December 10. The second installment is due February 1 and late April 10 and you can find more information about paying your “regular” property tax bill HERE.
If you find your property taxes on supplements, get in touch any time if you need to cut through the noise and better understand your responsibility as a new homeowner.
Pass the broccoli, Barry,
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
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