Supplemental Taxes

    Question:  Can you explain supplemental taxes--what they are and why Iím being charged for them since I thought we paid all the taxes back when we bought our home?  Our realtor wasnít much help in explaining them.

         Answer:  The Supplemental Real Property Tax law was enacted in 1983
         to aid Californiaís schools.  It comes into play when buying property or    
         undertaking new construction.  If you do either, you will be required to pay a
         supplemental property tax which will become a lien against your property as
         of the date of ownership change or the date of completion of new
         construction.

 Itís perhaps more easily understood using a real world
 example.  Letís say you purchase a property for $500,000, that prior to your 
 purchase had a $400,000 assessed value.

 At the close of sale, Title and Escrow will pro rate the
 property taxes between the seller and the buyer on the $400,000 assessed
 value.  The tax accounts between seller and buyer are effectively balanced at  
 this point.

  But remember, you now own a $500,000 property and the tax assessor hasnít entered  
  your property on the tax rolls, as such, because the legislature has decreed that property 
  taxes can only be reassessed every January 1
st.  But property taxes are on a fiscal year  
  running from July 1-June 30, not a calendar year.  Consequently, there will be a
  discrepancy between the period of time (month) that title changes hands at the old
  valuation and the time of the newly assessed valuation for the fiscal year.  In short, the
  supplemental assessment will be pro-rated, based on the number of months remaining   
  until the end of the tax year, June 30.

  For example, if the change of ownership or completion of new construction occurred on  
  October 1, you would be responsible for 9 months of the year at the new $500,000
  valuation since the taxes canít be reassessed until Jan 1 and the fiscal tax year doesnít
  end until June 30th of the following year.  So, if the change between the old and new tax
  bills were $1000 per year, your pro-ration factor would be .75, or in this case $750.  The
  pro-ration factor is simply 1/12 or .0833 per month.  When the new fiscal year begins on   
  July 1 your tax bill would naturally reflect the $500,000 sales price.  I hope this clarifies it
  for you.

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