Ask Phyllis!

Understanding Supplemental Property Taxes

Dear Phyllis,

You cover a variety of real estate topics. However, I don’t believe you have ever written about supplemental property taxes. I was the executor of my Uncle’s estate in San Diego.  We closed escrow in February and I received a supplemental tax bill for nearly $3,000.00.  I asked our Realtor® and she directed me to the county assessor’s office.  It seems that I do need to pay. I am hoping that you will assist me in understanding supplemental taxes and how they are calculated?  Dan

Dear Dan,

Under current California law, after there is a change of ownership to a home, the property is reassessed.

Supplemental property taxes are in addition to the regular annual tax bills. Never assume that supplement taxes were paid through escrow or that if the lender had property taxes impounded, your lender will pay it. Supplemental bills are sent directly to the owner (in your instance the trustee), and not to a lender’s impound account (if one exists).

State law requires that the Assessor reappraise property upon change in ownership. The supplemental assessment reflects the difference between the new value and the old value. This is not a penalty but merely recapturing the difference from the date of passing until the closing date. Think of this as a catch-up bill. The supplemental tax bill is simply a one-time bill that collects the difference of the property taxes from the sale date and those owed by your Uncle’s estate, at the time of his passing. 

For example, let’s assume your Uncle’s home was assessed at $600,000 and sold for $900,000.  The additional $300,000 is subject to property taxes from the time of his passing until the date you closed escrow. This additional amount is prorated by the number of actual days.

It is frustrating that this supplemental bill typically takes months to receive.

But you are correct that you need to pay this additional tax. It has been assessed. In order to avoid penalties, it must be paid in a timely manner..

  Phyllis Harb