If you’ve recently purchased a home in San Diego, California, you may be surprised to receive a supplemental tax bill in addition to your regular property tax bill. Understanding how supplemental taxes work can help you plan for this one-time expense and avoid any confusion.
What Are Supplemental Taxes?
Supplemental taxes are one-time property tax adjustments triggered by a change in ownership or new construction. When a property is sold, the county reassesses its value based on the purchase price. If the reassessed value is higher than the previous value, the county issues a supplemental tax bill to cover the difference.
How Do Supplemental Taxes Work?
When you buy a home, the county assessor determines its new taxable value. Since property taxes are based on this assessed value, an increase means you’ll owe more in taxes. However, reassessments don’t happen immediately, so for a period, you’ll be paying property taxes based on the previous owner’s assessment. The supplemental tax bill accounts for this difference once the reassessment is complete.
A Simple Example
Imagine a seller originally purchased their home for $500,000, resulting in an annual property tax bill of $5,000. They sell the home for $1,000,000, which means the new property tax bill will increase to $10,000 per year.
Until reassessment is finalized, the new owner will continue paying property taxes based on the previous $500,000 value ($5,000 per year). Once the reassessment is complete, the county will issue a supplemental tax bill for the difference—an additional $5,000—to cover the remaining months of the fiscal year.
When Will You Receive a Supplemental Tax Bill?
The timing varies, but it typically takes several months after closing for the county to reassess the property and issue the bill. If the reassessment happens near the end of a fiscal year, you may receive two separate bills—one for the remaining months of the current fiscal year and another for the next.
How to Pay Your Supplemental Tax Bill
Unlike regular property taxes, supplemental taxes are not included in your mortgage escrow account. This means your mortgage lender will not pay the bill for you, and you’ll need to pay it directly to the county tax collector in one or two installments.
Can Supplemental Taxes Decrease?
Yes! If the reassessed value is lower than the previous value—such as in a declining market—you may receive a supplemental refund instead of a bill.
Final Thoughts
Supplemental taxes can catch new homeowners off guard, but they’re simply an adjustment to reflect your property’s new value. By understanding how they work and planning ahead, you can avoid surprises and ensure a smooth transition into homeownership. If you’re unsure about your supplemental tax bill, be sure to check with your county tax assessor’s office for more details.