A supplemental property tax bill applies when there is any change in ownership or improvements that result in an increase in the value of a property.
The most common trigger of a supplemental tax bill will be the sale of a property. This is not a recurring bill as it is just a one-time assessment on the difference of the tax base value that was on the previous annual property tax bill and the new value.
For example, 123 Main St. has a tax base of $200,000.00. Then 123 Main St. sold in for $240,000.00. The County Tax Accessor’s office would receive the new current market value (purchase price) and update their assessment of 123 Main St. You would receive a supplemental property tax bill for the difference of $40,000.00 that was not assessed in the current tax bill.
New Value (Purchase Price): $240,000.00
Assessed Value on Tax Roll: $200,000.00
Supplemental Assessment Value (Difference): $40,000.00
Besides change in ownership, a new assessment may be generated by other actions such as building a pool, adding an additional bedroom, remodeling your house, and other city/county pulled permit improvements that are value adding.
If you have an impound account you are paying Principal, Interest, Taxes, and Insurance (PITI) all in one payment. Then why is the supplemental bill not taken care of by your payment? The supplemental tax bills are mailed to the owner of record. Your lender will NOT be made aware of this new bill.
If you receive a supplemental property tax bill and assume your lender has received the bill also, it may remain unpaid. Then when next year’s annual property taxes are due your lender will be made aware of supplemental back taxes due that were not expected. This may result in a shortage of funds in your impound account. In which case your lender will increase your monthly payment amount to recoup the shortage of impound reserves. Once reserves have been satisfied, your payment would go back down to cover projected expenses.
This can also work the opposite way, if there is a surplus of funds in the impound account you would receive a refund check back from your lender.
Having an impound account works well for most homeowners. It budgets your annual property tax bills and insurance premiums into 12 installments. Your lender (who you pay your mortgage to) manages this account and will pay these bills when due. In Kern County, property taxes are due in December and April. Your homeowners insurance premium would be due on its anniversary date. And if you have mortgage insurance (depending on loan product or equity position) your impound account would handle these disbursements as well.
If the cost of any of these factors where to increase or decrease over time, you will end up with either a shortage or surplus and your monthly payment will change to reflect. Since this impound account is handled as a type of “escrow” your lender is regulated on the use and management of these funds and will review the impound account once a year to verify it is balanced.
With no other triggers, property taxes may increase no more than 2% per year to account for appreciation.