Let’s talk about the dreaded supplemental tax bill.
I know, “dreaded” might seem a little bit harsh, but an additional tax bill showing up in your mailbox authorizes a negative reaction.
So, what exactly is the supplemental tax bill and why do homeowners receive it?
Anytime a property is sold to a new owner or a new construction is completed, the county must reassess it.
Reassessment results in extra taxes
This reassessment often results in additional taxes.
You will get sent a supplemental tax bill—showing your property’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 30.
To calculate the amount, the difference between your old assessed value and new assessed value is prorated based upon how many months are left in the fiscal year.
How it works
For example, if you have nine months left, that would be 0.75 of the year. So, your difference is multiplied by 0.75 and THAT total is multiplied by the 1% tax rate to get your total amount of supplemental tax.
If the supplemental event happens between June 1 and Dec. 31, you only will receive one tax bill. But, if it happens between Jan. 1 and May 31, two additional bills will be issued.
You will receive the bill anywhere from three to six months after the purchase of a new property.
(So, you may want to set some money aside).
This is separate from the annual tax bill
Note that this is separate from the annual property tax bill that you can expect in your mail no later than Nov. 1.
Homeowners commonly ask what happens if their new property is reduced in value?
In other words, what happens if the difference between your new assessed value and old assessed value is a negative number instead of positive?
Will you get a refund?
While a supplemental reduction (as this phenomenon is called) will not reduce the amount of your existing annual tax bill, you will get a supplemental refund calculated in the same way as the supplemental tax. This is a much more positive spin on the term “supplemental.”
What’s subject to these assessment?
According to the California State Board of Equalization, there are four types of properties subject to supplemental assessments:
- Land
- Improvements
- Fixtures
- Taxable possessory interests, or real property owned by a government agency that is leased, rented or used by a private individual.
Here’s what’s not subject to the tax
Not all home additions are subject to supplemental assessments. Here are a few examples of things that you won’t have to worry about:
- Boats
- Fixtures that are normally valued as a separate appraisal unit from the structure.
- Property assessed as a restricted historical property.
What does this mean for the Mill’s Act?
For Coronado, this means that any property registered under the Mill’s Act, which was enacted to promote the preservation of historical properties, will receive no supplemental bills. (if under contract at the time of transfer or new construction).
Coronado has a total of 164 properties under the Mill’s Act, according to Coronado’s Historic Preservation. If your home is one of them, don’t fret about receiving a supplemental tax bill in the mail.
I hope this insight provides a little more clarity on the “never-talked about” but “very-much dreaded” supplemental tax bill.
Here’s how to reach Corey
As always, I am here to provide my readers and clients with the information they need to have a comprehensive understanding of everything that goes into owning a property.
Please don’t ever hesitate to contact me with any questions or inquiries at (619) 568-0568 or info@simonerealestategroup.com.
I would love to hear from you, and am always available for assistance along any step of your home-owning journey!
-Corey
