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We have had taxpayers provide feedback to our
office which indicates that purchasers of real estate are either unaware
of or do not understand the supplemental property tax. To help all parties
involved in real estate transactions, we provide the following
information.
The supplemental property tax is an additional tax beyond the normal
annual tax for any increase in the value of property as determined by the
Assessor. This will include the purchase of property at a value higher
than the former assessed value, the addition of a home to a vacant lot or
any other major improvements such as a new pool or the addition of a room
onto a house.
The supplemental tax is billed separately and reflects the tax on the
difference in the new value of the property versus the old value. For
example, if a property with an assessed value of $100,000 is purchased for
$150,000, the difference ($50,000) is taxed in a supplemental (or
additional) tax billing at the property's area tax rate. The tax rate will
range from the basic 1.0% to just under 1.2% depending on the code area.
For the example of a $50,000 increase in value this would mean that the
supplemental tax could range from $500 to $600. In our world with large
$200,000 and $300,000 property assessments (especially with the
construction of a new home) the taxpayer might face a supplemental tax
bill for thousands of dollars.
Supplemental tax bills are prepared throughout the year and have
deadlines to pay without penalty of 30 days following receipt of the tax
bill to pay the first half and four months thereafter to pay the second
half. Due to the time frame necessary to process the change in value
through the Assessor's Office, apply the correct area tax rate and compute
the tax amount by the Auditor-Controller's Office, many months will have
passed before the new owner of the property (the taxpayer) will receive
the supplemental tax bill. Normally even taxpayers with impound accounts
will have to pay this supplemental tax bill "out of pocket"
unless the impound account company agrees to pay the tax bill out of the
impound account. Once the annual tax billing reflects the increased value
of the property, no further supplemental tax billings are necessary.
As always, any reduction in value will result in a refund of taxes paid
or a reduction in taxes owing.
State laws related to the supplemental tax can be found in California
State Law Revenue and Taxation Code sections 75.10 through 75.55. These
sections are in law books at the Law Library or can be found on the
Internet at www.leginfo.ca.gov. |
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