Buying a home is an exciting milestone, but new homeowners often get surprised by supplemental property tax bills. Since these bills arrive separately from your annual taxes, you may wonder – does my escrow account pay it?
The answer is generally no. Supplemental tax bills are the owner’s responsibility, not your mortgage escrow account. This article explains what supplemental taxes are, why escrow doesn’t cover them, what happens if they go unpaid, and tips for managing this extra cost.
What Is a Supplemental Property Tax Bill?
A supplemental tax bill is a one-time charge for additional property taxes not included in your annual bill Common triggers include
- You purchased the home, causing reassessment at a higher value.
- The county increased the assessed value due to improvements.
- New construction was completed on the property.
The supplemental bill covers the increased taxes from the trigger date through the end of the fiscal tax year on June 30th. The amount due is prorated for the number of months left in the year.
So unlike your annual property tax bill, this new charge is just a one-time tax event, not recurring. But it can come as an unwelcome surprise to new homeowners who overlooked this extra cost.
Why Doesn’t Escrow Pay Supplemental Taxes?
While your lender’s escrow account pays your regular annual property tax bill, supplemental taxes are different for two key reasons:
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Separate Bill The supplemental bill comes directly from the county to you, not your mortgage servicer So escrow doesn’t receive or see this bill
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Variable Timing: Supplemental bills can come 3 weeks to 6+ months after taking ownership. This unpredictable timing means escrow can’t anticipate the amount needed.
Since your mortgage company doesn’t receive the supplemental bill, it falls directly on you as the homeowner to pay. But what if you don’t?
What Happens If Supplemental Taxes Go Unpaid?
Failing to pay your supplemental bill on time triggers penalties and risks lien placement:
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A 10% penalty applies after the delinquent date, plus late fees.
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If still unpaid by year-end, the property enters tax default status.
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Ongoing 1.5% monthly penalties accrue until paid.
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A redemption fee gets added to the amount owed.
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The county can place a tax lien on the property, affecting title.
While escrow doesn’t pay supplemental taxes, an unpaid bill with penalties and lien may force them to pay it to protect their interest. This results in an increased mortgage payment and escrow shortage.
Tips for Handling Supplemental Tax Bills
While this extra tax bill throws many new owners for a loop, being prepared can prevent problems:
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Anticipate and budget for potential supplemental taxes when buying a home.
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Save the county tax assessor’s number to discuss valuations if needed.
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Look out for the bill in the mail and pay promptly by the due date.
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If not received within 6-8 months after closing, follow up with the county.
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Set payment reminders to avoid penalties.
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Contact your mortgage servicer with any tax default concerns.
While supplemental taxes aren’t paid from escrow, they protect your property from liability if left unpaid. Stay organized and proactive, and this surprise bill will be one less headache for new homeowners.
Frequently Asked Questions About Supplemental Tax Bills
Here are some common supplemental property tax questions:
How are supplemental taxes calculated?
It’s the new tax rate applied to the home’s value increase, prorated by number of months left in the fiscal tax year.
When will I receive the supplemental tax bill?
Anytime from 3 weeks to over 6 months after taking ownership, depending on your county.
Can I contest the increased valuation?
Yes, contact your assessor’s office within set time limits to discuss appealing the value.
What if I don’t receive a supplemental bill?
Follow up with the county tax collector to check status if it’s been over 6 months since closing.
Do ALL locations have supplemental tax bills?
No, some states don’t reassess property values until the regular annual cycle. Check your state’s process.
Can my escrow account ever pay supplemental taxes?
In rare cases, they may pay a defaulted bill to protect their interest, then require repayment from you.
The arrival of a supplemental tax bill can be an unwelcome surprise for new homeowners. But understanding the process ahead of time and budgeting accordingly will ensure you can manage this extra cost smoothly. Don’t let an overlooked bill put your new property at risk.
