What Is a Supplemental Tax Assessment?

What Is a Supplemental Tax Assessment?

A supplemental tax assessment calculates additional taxes owed on an existing tax bill, most commonly your property taxes. Because property taxes are levied by your local government (often your county), tax rules and rates can vary from one place to another. Check with your local taxing authority for information on supplemental tax assessments in your community.

To illustrate how supplemental tax assessments work, here's a common scenario:

You buy a home 10 months into the property tax year. The former homeowner paid property taxes for the whole year based on an assessed home value of $200,000. You paid $350,000 to purchase the home. The local property tax authority reassesses your home's value based on the $350,000 purchase price and determines that you owe supplemental taxes for the two months you'll own the home before your next property tax bill is due. Your supplemental tax bill will be based on the difference between the old assessed value ($200,000) and the current value ($350,000), or $150,000. It will also be prorated based on the time remaining in the tax year, in this case two months.

Home sales are a common trigger for supplemental tax assessments, but other events may also cause a reassessment of the property tax you owe. These can include:

• New construction: Building a home on previously vacant land or to replace an old (presumably less valuable) structure is likely to change the assessed value of your property.
• Significant improvements: Additions, new accessory dwelling units (ADUs) and substantial renovations may cause a significant rise in assessed value.
• Change in ownership: In certain cases, adding or removing someone from a property's title may trigger a new assessment.

It's also possible for a supplemental tax assessment to reduce your tax bill. If your home's value declines, you may be able to request a new assessment to reduce your home's assessed value and lower your property tax bill. If your property value is reassessed in the middle of the property tax year, you may receive a refund of the difference.

How to Pay a Supplemental Tax Bill

Supplemental tax bills are usually issued separately from your regular tax bills. If you recently purchased your home, completed a remodel or made changes to your home's title during a refinance, keep an eye on your mail for a supplemental tax bill. Your supplemental bill may be mailed to your home address even if your regular property tax bills go to your mortgage servicer.

How Do I Know It's a Supplement?

Supplemental tax bills may be marked as supplemental, interim or additional or may arrive with a letter explaining the supplemental tax. If you receive a tax bill you don't understand, contact your local tax assessor's office to find out why you've received a bill and how you should pay it.

Will My Escrow Account Cover Supplemental Taxes?

Some mortgage servicers add your projected property taxes onto your monthly mortgage payment and keep the money in escrow until your property taxes are due. If you have this arrangement with your mortgage provider, your regular property tax bill is covered but your supplemental bill, typically, is not. Check with your mortgage company to confirm but be aware that supplemental taxes are usually your responsibility to pay.

Do I Have to Pay It All at Once?

Follow the payment instructions that are included with your supplemental tax bill. In some cases, you may be able to pay the bill in installments.

The Bottom Line

To avoid getting surprised by a supplemental tax bill, check with your local property tax authority before purchasing a home, beginning a construction project or making changes to your property's title. Learning more about supplemental tax bills in your community can help you budget for the additional expense and mark your calendar so you know when to look for the extra bill.