Supplemental Property Tax is just about the most confusing aspect of purchasing a homeDear Tracy
What does this Supplemental Property Tax notice mean to me? Wonâ€™t I pay the property tax I owe when escrow closes and then when the next regular tax bill comes?
Supplemental Property Tax is just about the most confusing aspect of purchasing a home in Los Angeles County, and probably anywhere else, but this is the area that I know.
In the first place, property tax itself is confusing because you pay the tax in December for the first half of the fiscal year that began the previous July 1, and you pay the following April for the second half which runs to the next June 30.
the valuation of your property that you are paying tax on in any given fiscal year is figured as of the previous January 1. If you think this is a bit confusing, add the supplemental tax payment in and you have a real lack of understanding going on.
The key to figuring all this out is threefold:
1. The Supplemental tax bill is based on the reassessed value of the property you just purchased.
2. The county tax assessment is paid in arrears. When you purchase a home, the property tax amount is reassessed, but not instantly. A Q and A flyer from Equity Title (https://www.equitytitle.com/metroportal/EquityTitle/pdf/Generic-S11-17_Supplemental%20Property%20Taxes%202009-equity.pdf
) says that you might be reassessed and billed in as little as 3 weeks, or it could take 6 months. Remember, this is a one-time tax bill that â€œsupplementsâ€ the regular tax bill. It is not going to be added in to the regular bill so if you buy a home between August 1 and March 1, you are probably going to have a large supplemental bill show up in your mail box. The Supplemental Tax is figured on the additional tax due until the next June 30, the end of the fiscal year. Because the tax you paid at the close of escrow was based on the value of the property as of the previous January 1, remember?
3. The county tax assessorâ€™s office is run by human beings, not computers. This means that when you receive the bill is dependent on things like each countyâ€™s own procedures, even on the workloads of the various County Assessor, Auditor, and Tax Collectorâ€™s offices. Since we are currently in an economic downturn, you can bet these offices are understaffed. That means that the memory of your escrow closing will have become very distant and vague when this mysterious Supplemental Tax Bill shows up. I once bought and sold a home before the Supplemental Tax bill came. Imagine how painful that was when I figured out that I still actually owed that amount!
This is from the LA County Assessorâ€™s Office:
Supplemental taxes are in addition to the regular annual tax bills. Like annual tax bills, payment may be made in two installments. Supplemental bills are mailed by the Treasurer and Tax Collectorâ€™s Office directly to the property owner and in general are not paid out of impound accounts. The property owner is responsible for the supplemental bill(s) and, in the event of an impound account, should verify with the lender regarding who should make the actual payment.
If a Homeownersâ€™ Exemption or Veteransâ€™ Exemption is applied to the supplemental, the actual taxes due may be less than the estimate provided.
If the supplemental tax estimate is a refund, the Auditor-Controllerâ€™s Office will generate a supplemental tax refund. Like the supplemental tax bill, the supplemental refund will be mailed directly to the new property owner.
To view a sample Supplemental Tax Bill or for additional information regarding Supplemental Tax Bills, please visit the Los Angeles County Property Tax Portal.
Here is what you must remember when you receive this bill
1. You are not being billed for something that you donâ€™t really owe (remember, your tax bills are based on past information).
2. If you impound your tax payments with your mortgage, your lender is not going to automatically pay this bill (they donâ€™t receive this bill, only you do. They will receive regular tax bills).
3. If you do impound your tax payments with your mortgage, your payments should include the amount that the supplemental bills you, so you just have to send your lender the bill and they will pay it out of your escrowed account.
4. If you donâ€™t pay your taxes monthly along with your mortgage, you are going to have more than one tax bill to pay. This is a really good reason to have your tax payments included in your monthly mortgage payment.
I want to emphasize that last point: many experts tell you to pay your taxes yourself because you are essentially giving the lender your money at no interest. I have found in the many years that I have owned property that receiving a hefty tax bill that is due in part right before Christmas and the rest is due right before income tax time is not the best way for me to deal with financial obligations.Â It's painful, in fact.Â The interest I might make on the money that I would put in a savings account (would I really?) instead of sending it to the lender is infinitesimal. I prefer the same regular payment every month. When the supplemental tax bill comes, I send it to my lender and go on with my life. But it is your choice.