When you purchase a new home, everyone seems to be throwing numbers at you. There are closing costs from your loan, additional fees for inspections and appraisals, and much more. It can become overwhelming, and really hard to keep track of. While I try my best to help you keep all these costs in mind, there is one hidden fee that tends to slip through the cracks, your Supplemental Tax Bill. It's technically not a closing cost, as you will likely receive the bill 3-6 months after your purchase is completed. For some new homeowners, it may be a small bill of a couple of hundred dollars, but for others it can be in the $5,000 range. I don't know about you, but if I got hit with a big bill, it could really ruin my monthly or quarterly budget. This is why I want to explain the supplemental tax bill, and help you prepare for it after closing.
The San Diego County Treasure-Tax Collector has put together a quick video to help describe the bill, take a quick 3 minute break and watch it here.
Here's Some of the Fine Print
A supplemental or negative supplemental tax bill will arrive separately from all other property tax bills. Anytime a property is sold to a new owner or new construction is completed, state law says it must be reassessed by the County. That reassessment will most likely change the assessed value of your property. When your assessed value changes, the County must recalculate your property taxes, and when those change, we will send you a supplemental tax bill. The supplemental bill shows your home’s change in value from the day you closed escrow, or reported the new construction, through the end of the fiscal year, which is June 30th. To calculate your supplemental tax bill, subtract your home’s old value from the new market value based on the reassessment. You are taxed on that difference. Next, we prorate what you owe based on the number of months left in the fiscal year. Finally, the 1% tax rate is applied to that amount to get your supplemental tax total. If you don't pay your supplemental tax bill by its delinquent date, you will be charged a 10% penalty. A $10 charge is added if you are late on the second installment. If you do not pay either installment by June 30th, your property will go into "tax default," and you will be charged a 1.5% penalty per month (18% penalty per year). A $33 redemption fee will also be added to your bill. If you have questions about property valuations, visit the County Assessor’s website.
Negative Supplemental Bills You will receive a negative supplemental tax bill if your new assessment is lower than your prior-assessed value, if you get a senior citizen’s transfer of Proposition 13 values, or if you have another downward assessment. The negative supplemental will include a refund check, which can be applied to any other open bills you may have on your parcel. A negative supplemental bill does not change your responsibility to pay all other property tax bills.
Does it Still Not Make Any Sense?
If that's the case, let's talk. I want to make sure you understand the complete process when purchasing or selling a home.
