Supplemental Tax

Supplemental tax bill

Supplemental Tax assessments or supplemental tax bills raise property taxes.

Sample supplemental tax bill

Supplemental Bill example los angeles

Need help understanding and reading your Supplemental Tax bill? View an explanation of each information field of the bill at the Los Angeles Assessor’s website:

http://lacountypropertytax.com/portal/bills/suppbill.aspx

Large, and sometimes surprising, Supplemental Tax assessments or supplemental tax bills are common with Remodels, New Construction, or longtime owner sales (lived there 20+ years). These types of sales typically have a large change in the tax value of the property after the sale which means a big jump in property taxes from the previous owner to the new owner. New Homeowners are sometimes tricked into thinking their property tax is very low, because they get the property tax bill for the previous owner in the mail and it’s less than what they owe. In most transactions the tax value of the property changes, and a supplemental tax bill will raise the property taxes to your new level.

Supplemental tax bills are regularly sent to first year home owners to readjust property tax to its new level, but sometimes they can also be refunds (if the tax value for the property was lowered — See Prop 60 & 90).

You don’t have to complete a sale to trigger a supplemental tax assessment. If you decided to add on square footage to your home, making it larger, this could trigger a reassessment by the tax collector, and will raise your property taxes.

In California, whenever a property is bought or sold- this triggers a reassessment of the property’s tax value or assessed value. The new annual property tax is calculated approximately by multiplying the sales price of the property by 1.25%.

How to Calculate Property Tax in Los Angeles:

Example 1.:

Sale Price $800,000 x 1.25% = $10,000 annual property tax

Property taxes in Los Angeles are paid biannually. The property tax bills are mailed out each year in October, to be paid in two installments- once in November and once in February. Depending on when your sale closes in the year, there will be a proration of the property taxes between the seller and the new owner. For the state, the fiscal year runs from July 1 through June 30. A sale or new construction completion which occurs between January 1 and May 31 results in two supplemental assessments and two supplemental tax bills. A sale between July 1 and Dec 31 will have only one supplemental bill.

Example 2:

Sample Supplemental Tax Bill Calculation

Let’s assume a seller bought a fixer property for $500,000 January 1st and spent money to totally remodel it and sell it and the property sold for $800,000 April 1st to the new buyer.

Seller Assessed Value: $500,000

Sale Price: $800,000

Seller Current Property Tax: $6,250

New Property tax upon sale: $10,000

Proration of property tax: 2 months (May and June)

Buyer has purchased before July 1 so there will two supplemental tax bills. Take remaining months until July which would be 2. Take the difference between the two taxes ($10,000 – $6,250 = $3,750) and prorate it for two months ($3,750/12 months * 2 months = $625). $625 is supplemental tax bill #1. Supplemental tax bill #2 is $3,750 for the next year, and from then on your property taxes are $10,000 a year.

Too complicated? The assessor’s office has a supplement tax calculator to do it for you:

http://assessor.lacounty.gov/extranet/guides/SuppTaxCalc.aspx

Supplemental tax Bills are mailed out about 6 months after you purchase your new home. Sometimes they can take as long as 9 months to show up in the mail.

It is important to note with mortgages that have an impound for paying your property tax for you, they do not pay your supplemental tax bill. This is because state law says that the supplemental tax bill must be sent to the owner, so the lender doesn’t know about it. If you assume your lender is handling it, and you don’t pay the Supplemental bill by the due date, you will incur a 10% fee as a penalty! This penalty will not be excused by the state, so make sure you pay on time or talk with your lender to alert them and make them aware of it. 

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