šŸ¤¢Supplemental taxes?? How much can I expect the bill to be??šŸ¤®

4 Replies

Quick questions- 

What kind of taxes and who pays?

Senario-

Family #1 buys at $700k in sunny CaliforniašŸin 2015. Family #2 wants to come in and buy at the new property in 2021 valued now at $1m. Family #2 now needs to pay the taxes on the new assessed property tax (.73% avg) of the $1m. Right? Is it as simple as that?

The questions that arise-

When and why does supplemental taxes come into play? 

Who pays them if the property was purchased as an investment, flipped and then sold 3-4 months later? 

Am I over thinking this? 

Originally posted by @Nathan Stanley :

Quick questions- 

What kind of taxes and who pays?

Senario-

Family #1 buys at $700k in sunny CaliforniašŸin 2015. Family #2 wants to come in and buy at the new property in 2021 valued now at $1m. Family #2 now needs to pay the taxes on the new assessed property tax (.73% avg) of the $1m. Right? Is it as simple as that?

The questions that arise-

When and why does supplemental taxes come into play? 

Who pays them if the property was purchased as an investment, flipped and then sold 3-4 months later? 

Am I over thinking this? 

Supplemental taxes come into play because the county generally updates assessed value just once a year. When a property is transacted, the new owner will continue paying the same tax rate as the previous owner but will also be sent a supplemental bill to cover the new assessed value. So in your example above, the new owner will continue paying the main tax bill at the same 700K assessed value but also be sent a supplemental bill to cover the remaining 300K until the county updates the assessed value. 

Primary residence or investment buy and hold, or quick flip... it doesn't matter. The supplemental bill will always be sent to the new owner if purchased at a price higher than the existing assessed value.

I inherited a cabin from a relative in CA.  I resold the cabin.  I had to pay the supplemental tax bill at closing for the prorated amount.  The County gave an estimate.  When they pulled it all together and did the exact figures I had over paid.  So a year later they sent me a form to recoup a few hundred dollars.  I sent in the form, verifying the sale day and they sent me the check.  That sales contract said that the taxes would be prorated.

For a undeclared wholeseller on another property, those jerks got what they deserved. The County had not figured out the supplemental taxes before it was resold and their contract did not say that taxes were prorated. The contract was --you get this amount $xx.  They got the whole bill!  For the time I had it!  It was previously bought in the 1970's and transferred to me about 7 months before it sold, in 2018.  So the value went form maybe $75k to $525k.  And even better it sold in October!

If you call the assessor's office for the value, you can then call the tax collector's office for the amount.  Some counties have a website that will do it for you based on the selling price and date you enter.  LA does!

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Originally posted by @Tony Kim :
Originally posted by @Nathan Stanley:

Quick questions- 

What kind of taxes and who pays?

Senario-

Family #1 buys at $700k in sunny CaliforniašŸin 2015. Family #2 wants to come in and buy at the new property in 2021 valued now at $1m. Family #2 now needs to pay the taxes on the new assessed property tax (.73% avg) of the $1m. Right? Is it as simple as that?

The questions that arise-

When and why does supplemental taxes come into play? 

Who pays them if the property was purchased as an investment, flipped and then sold 3-4 months later? 

Am I over thinking this? 

Supplemental taxes come into play because the county generally updates assessed value just once a year. When a property is transacted, the new owner will continue paying the same tax rate as the previous owner but will also be sent a supplemental bill to cover the new assessed value. So in your example above, the new owner will continue paying the main tax bill at the same 700K assessed value but also be sent a supplemental bill to cover the remaining 300K until the county updates the assessed value. 

Primary residence or investment buy and hold, or quick flip... it doesn't matter. The supplemental bill will always be sent to the new owner if purchased at a price higher than the existing assessed value.

 

@Tony Kim

Thank you so much for this information! Helps me understand and my clients when they have questions!

Originally posted by @Lynnette E. :

I inherited a cabin from a relative in CA.  I resold the cabin.  I had to pay the supplemental tax bill at closing for the prorated amount.  The County gave an estimate.  When they pulled it all together and did the exact figures I had over paid.  So a year later they sent me a form to recoup a few hundred dollars.  I sent in the form, verifying the sale day and they sent me the check.  That sales contract said that the taxes would be prorated.

For a undeclared wholeseller on another property, those jerks got what they deserved. The County had not figured out the supplemental taxes before it was resold and their contract did not say that taxes were prorated. The contract was --you get this amount $xx.  They got the whole bill!  For the time I had it!  It was previously bought in the 1970's and transferred to me about 7 months before it sold, in 2018.  So the value went form maybe $75k to $525k.  And even better it sold in October!

If you call the assessor's office for the value, you can then call the tax collector's office for the amount.  Some counties have a website that will do it for you based on the selling price and date you enter.  LA does!



@Lynnette E.

Thank you! I will be sure to use this as a tool to help my future clients understand before they are surprised by it like I was!