Are Your California Property Taxes On Supplements?

By
Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

Are Your California Property Taxes On Supplements?

 

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 officially in their name.  Specifically, buyers are no longer just responsible for their "payment," meaning the rent or mortgage payment, but once owners, they also shoulder the responsiblity 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, and a separate bill is often issued to "catch up" the new basis with the previous one.  Let's use a very 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 would be $10,000.  If you buy the home for $1,000,000 and the tax rate is the same at 1.25%, 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 of your ownership.

 

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 determination 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 in California 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:

  1. 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.
  2. 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 bills 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.  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 continue to receive only 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.  We're here to help.

 

Pass the broccoli, Barry, 

 

 

Robert J. Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959 
rob.spinosa@rate.com

 

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709
 

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate's Human Resources Department.

 

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood ChicagoIL 60613 - (866) 934-7283

Comments (13)

Rose Mary Justice
Synergy Realty Pros - Dandridge, TN
Synergy Realty Pros

You are the go to guy for mortgages in your area.  You can inform buyers well.

Dec 16, 2019 07:54 AM
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Flower Mound, TX
Selling Homes Changing Lives

Rob - Excellent advice!!! 

Many first time home buyers don't understand how supplements for property taxes, including home insurance, and HOA (if applicable) works and you explained it clearly! Every state has their own rules too. In TX our taxes are due by December 31st and becomes delinquent in January which makes it very difficult for many new home owners and others as well. 

Dec 16, 2019 11:15 AM
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

Hi Rob,
I had no idea they charged a "supplemental" tax.  As far as I know, our assessor just adjusts the total due for the next tax year. 

Also, buyers need to understand they need to be putting money aside for maintenance and repair expenses that don't apply to renters.

 

Dec 17, 2019 09:36 AM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Hi Rob;

Thanks for the education for buyers on the taxes in CA - it can get a bit confusing. when you talk about supplements on top o fthe semi-annual property tax bill. Buyers don't always understand that the taxes will change when they buy the home nor by how much. It can, in some cases, be a big surprise.

Jeff

Dec 21, 2019 10:09 PM
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hi Rob - as Jeff Dowler, CRS commented a discussion of California supplemental taxes can be confusing.  It's quite similar to standing in a drug store aisle looking at range of products available that seem to quickly blend together.  Madness?  Noise?  Hmm...I wonder.

Dec 22, 2019 06:14 AM
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