Supplemental Tax Bill vs. Secured Tax Bill (& Does My Tax Impound Account Cover Both?)

Couple Facing Debt Problems, Not Able To Pay Out Their Mortgage.

 

Supplemental assessments reflect any increase or decrease in assessed value due to a change in ownership or completed new construction. These values become effective as of the first day of the month following the change in ownership date, or the new construction completion date. Supplemental assessments result in tax bills that are “in addition to” (supplemental to) the annual property tax bill that is sent to property owners in October.

 

SUPPLEMENTAL EVENTS

Changes in ownership or new construction activities that trigger supplemental assessments are referred to as “supplemental events”.

Change in ownership is:

The sale or transfer of a property.

  • Certain forms of property transfer are not subject to reassessment. These exceptions include: Inter-spousal transfers
  • The addition of joint tenants
  • The transfer, sale or inheritance of certain properties between parents and their children or grandchildren when an application for exclusion is filed with the assessor
  • Transfers between registered domestic partners

New construction is:

  • Any improvement to real property, such as adding a room, pool or garage
  • Any alteration which restores a building or other improvement to the “substantial equivalent of new” (such as completely renovating a building)
  • An alteration that changes the way a property is used (e.g. a residence is converted to a retail store, or a garage is converted to living area)

Only the newly constructed portion may be reassessed.

 

REASSESSMENT

A supplemental event results in reassessment. When a property is reassessed, the Assessor determines the fair market value of the portion that is newly constructed or that changed ownership, based on the event date. Once the new assessed value of the property has been determined, the Assessor will send a Notice of Supplemental Assessment that will show the new assessed value, as well as the net supplemental assessment amount.

A reassessment may be:

  • An assessed value increase resulting in a supplemental bill(s)
  • An assessed value decrease resulting in a supplemental refund(s)
  • Retaining the same assessed value (no change)

 

SUPPLEMENTAL TAX BILLS

Depending on the date of the supplemental event, either one or two supplemental tax bills will be produced:

  • Supplemental events that occur between January 1 and May 31 will generate two supplemental bills.
  • Supplemental events that occur between June 1 and December 31 will generate one supplemental bill.

Taxpayers may also receive more than one supplemental tax bill if more than one supplemental event has occurred in a fiscal year. If this occurs, the bills are prorated between each owner for the period of time the property was owned.

 

Example:

New value at date of purchase or completion of new construction:         $320,000

Prior assessed value on current main tax roll:                                         -$200,000

The Net Supplemental Assessment increase will be:                            =$120,000

If the net supplemental difference is a positive amount, a bill will be generated if the bill amount is over $10.

If the net supplemental difference is a negative amount, a refund will be generated if the amount of refund is over $10 and the annual tax bill has been paid in full.

 

COMPUTATION OF SUPPLEMENTAL TAXES

The formula for calculating a supplemental tax amount is shown below:

(Amount of Net Supplemental Assessment) x (Tax Rate) x (Monthly Factor)

The Amount of Net Supplemental Assessment is the new assessed value, minus the prior assessed value, minus any exemptions allowed.

The Tax Rate is 1% plus recapture factor for any voter-approved bonded indebtedness.

The Monthly Factor represents the number of whole months remaining in the fiscal year after the month of the supplemental event.

 

ARE SUPPLEMENTAL TAXES PAID FROM MY IMPOUND ACCOUNT

The answer is no.  Mortgage servicing agencies do not receive the supplemental tax bill.  Supplemental tax bills are sent directly to the property owner.  Money in your impound account does not take into account supplemental taxes.  The property owner is responsible for paying the supplemental tax bill(s) separately.

 

HOMEOWNERS EXEMPTION

You may be eligible to receive the Homeowners’ Exemption of up to $7000 of assessed value on a supplemental tax bill if the property you acquired was not already receiving the exemption on its annual roll bill and the property you acquired will be your principal place of residence.

A Homeowners’ Exemption is not granted automatically. You must submit a claim form to the Assessor for the Homeowners’ Exemption no later than the 30th day following the date of notice printed on Assessor’s Notice of Supplemental Assessment to receive a full exemption, or an exemption of 80% of the full amount will be granted if you file a claim form by the first installment due date.

To be eligible for the exemption you must occupy the home as your principal residence within 90 days of the purchase date or completed new construction for a newly built residence.

The Homeowners’ Exemption can only be applied to a supplemental assessment that is a net increase and results in a supplemental tax bill. It cannot be applied to a supplemental assessment lowering the value.

For all your home financing and refinancing questions, call Karen Douglas, your Mortgage Genie.

Karen Douglas