What is a Supplemental tax bill?
In Los Angeles county taxes are paid on a fiscal year starting from July to June of the following year.
Taxes are assessed on the values as of January 1st of every year.
So when you purchase a home, although your taxes will be calculated based on a certain percentage of the sale price (currently 1.25%) the new bills won’t be adjusted until your property is reassessed. Reassessments are only done when the tax office receives the transfer information after closing. It could take several months for this to take place.
If your seller was paying taxes on a lower assessed amount, you will be getting a separate supplemental bill for the difference between what you owe for the higher amount from the day you closed until the date the new tax bill is generated with the new assessed amount.
You may get two supplemental tax bills depending on when you purchased your home. For example, If you close on your home in March and the fiscal year is from July to June, you will owe taxes for the bill from March to June of the year you closed and then possibly from July to June of the following year if the reassessment wasn’t done until after the second bill was generated.
What if your taxes are included in your mortgage payment through an impound account?
This is where things get a little tricky. If your mortgage company has an impound account calculated on the higher amount (which they should), then yes, they should have extra in the account. However, Supplemental tax bills do not go to the mortgage companies, only to the owners. Mortgage companies are only allowed to keep a certain amount in excess in the impound account for a certain period of time. So you may get a refund for the extra amount before you even get the supplemental tax bill and not know what it is for. Sometimes the mortgage company will adjust your payment DOWN when they get the tax bill before it’s assessed and then there wouldn’t be any extra in the account. Then when they reanalyze your account on the yearly anniversary, they would have to adjust your payment back up to meet the correct amount to cover the taxes and insurance.
So if you get a notice from your mortgage company that your payment is lower than what your lender estimated, don’t get too excited! And if you get a refund check, don’t run out shopping! You will have to pay the bill when it comes in. But the good news is, it’s only the first year when you purchase a home that you will get the supplemental tax bill.
Now if you purchased a home for LESS than what the house was assessed for which would make the tax amount the seller was paying higher than what you will owe, the opposite would be true, and you would get a refund! Now you can resume shopping.
What if your value decreased after you purchased your home? You may qualify for an automatic reassessment, or you can request a Decline-in-Value review. Claim forms are available online and can be filed between June 1 and November 30. You can find out how to go about the process at http://lacountypropertytax.com or www.assessor.lacounty.gov