UNDERSTANDING PROPERTY TAXES AND SUPLEMENTAL BILLS
Property taxes can be confusing, especially to a first-time home buyer. Many questions new property owners ask are:
- How much tax can I expect to pay?
- When are taxes due?
- Does my lender pay the property taxes or do I?
- What is a supplemental tax bill?
CALCULATING YOUR NEW PROPERTY TAX BILL
When a property is sold and changes ownership, the County Tax Assessor will re-assess the property. The assessment will be retroactive back to the transfer of ownership date. How much can you expect your property tax to be? Generally, if you purchased your property at current market value, you can estimate your taxes by this formula:
Purchase price x 1.25% = New Tax Amount.
THE FISCAL TAX YEAR
The Fiscal Tax Year runs from July 1st through June 30th of the next year. The First Installment of taxes covers the period between July 1st through December 31st. This First Installment is due November 1st, and is delinquent after December 10th.
The Second Installment of taxes covers the period between January 1st and June 30th, is due February 1st and is delinquent after April 10th.
IMPOUNDS
If you obtained a loan to purchase your new home, your lender may have established an impound account for payment of taxes and insurance, either at your request or as a loan program requirement. If you have an FHA insured loan, this impound account will also include your monthly mortgage insurance premium. Your lender will pay your general property taxes that are due by December 10th and April 10th each year.
SUPPLEMENTAL TAX BILLS
A Supplemental Tax Bill is received when your new tax assessed value is higher than the previous owner’s assessed tax value. Since the new assessment is retroactive back to the transfer of ownership date, you will receive a supplemental tax bill that will cover your higher assessment from the date of new ownership through the rest of the fiscal tax year, since the amount being currently collected is based on the previous owner’s assessed value.
As a general rule, Lenders do not pay supplemental tax bills from impound accounts. Most likely the new owner will need to pay any supplemental taxes directly to the County Tax Collector.
If you close between January 1st and June 30th of any given year, you MAY receive two supplemental tax bills, as real property taxes are based on the assessment of property as of January 1st each year.
Supplemental Tax Bills are marked clearly as a supplemental bill, and it comes in the name of the responsible party, most often the new owner.
Please do not hesitate to call Touchstone Escrow Inc. at 760-280-2200 if you have any questions.
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