What Are Supplemental Taxes on Property?
Demystify supplemental property taxes. Understand these special, often unexpected, property tax assessments.
Supplemental taxes on property are an additional property tax assessment that can arise outside of the regular annual billing cycle. These assessments capture increases in a property’s value that occur between standard yearly valuations. They ensure that property tax liabilities reflect current market conditions or significant property enhancements more promptly.
What Supplemental Taxes Are
Supplemental taxes are distinct from regular annual property tax bills. They are levied when a property’s assessed value changes significantly due to specific events, outside the routine yearly assessment process. These taxes are a one-time or temporary additional bill, designed to account for the increased value for a portion of the tax year.
An annual assessment establishes a property’s value for the upcoming fiscal year. In contrast, a supplemental assessment occurs when an event causes the property’s value to change mid-year. This supplemental assessment covers the period between the event and the next annual tax roll, ensuring property owners pay taxes on the increased value for that interim period. If the new assessed value is lower than the prior value, a negative supplemental assessment may result in a refund.
When Supplemental Taxes Apply
Supplemental tax assessments are triggered by specific circumstances that lead to a reassessment of a property’s value. These events most commonly include a change in ownership or the completion of new construction or significant improvements. These events establish a new base year value for the property, reflecting its current market value for tax purposes.
A change in ownership, such as the sale or transfer of a property, frequently triggers a supplemental tax. When a property is sold, its value is reassessed to its current market value, which can be significantly higher than its previous assessed value. This reassessment means the new owner becomes responsible for taxes on the updated value from the date of acquisition.
New construction or major improvements also result in supplemental tax assessments. This includes building a new home, adding rooms, or undertaking significant renovations that increase a property’s assessed value.
How Supplemental Taxes are Assessed and Paid
After a triggering event, the local assessor’s office determines the property’s new fair market value. The “supplemental assessment amount” is calculated as the difference between this new assessed value and the property’s prior assessed value. This difference represents the increase in taxable value due to the event.
This increased value is then taxed for the remaining portion of the fiscal year, leading to a prorated amount. For instance, if a property changes ownership or new construction is completed in a given month, the supplemental tax will cover the period from the first day of the following month until the end of the tax year, which is typically June 30.
Property owners may receive one or two supplemental tax bills, depending on when the triggering event occurs within the fiscal year. These bills are mailed directly to property owners and are separate from the regular annual tax bills.
They detail the property address, owner information, and the calculation of the supplemental assessment. Payment is required in two installments, similar to annual property taxes, but specific due dates depend on when the bill is mailed. Mortgage servicers typically do not cover supplemental tax bills through impound accounts, making direct payment the owner’s responsibility.