Does Escrow Pay Supplemental Tax Bill

Does Escrow Pay Supplemental Tax Bills? What Homeowners Need to Know

If you recently purchased a new home or made improvements to your property, you may be wondering if your mortgage escrow account pays your supplemental property tax bill This one-time tax can come as an unwelcome surprise to homeowners who are unfamiliar with how supplemental assessments work

While your lender’s escrow account will pay your recurring annual property taxes, supplemental taxes are handled differently. So do mortgages pay supplemental tax bills? Unfortunately, the answer is generally no.

As a homeowner, it is critical to understand what supplemental taxes are, when they are charged, why escrow does not pay them, and your responsibilities for payment. This guide will provide all the key details you need to know about supplemental property taxes and how to budget for this extra expense.

What Are Supplemental Property Taxes?

Unlike your annual property tax bill, a supplemental tax bill is an additional one-time charge levied when the assessed value of your home changes significantly. Some common triggers for supplemental taxes include:

• Purchase of a new home

• New construction or additions

• Major renovations that increase property value

• Reassessment due to rising market values

Since your regular property taxes are based on old assessed values, the county must levy a supplemental tax to make up for the difference in taxes owed on the new increased value.

Think of it like a one-time tax adjustment to align with your home’s current market value. Supplemental taxes only cover the remaining portion of the tax year until June 30th. You will still owe your normal annual property taxes going forward.

When Are Supplemental Taxes Charged?

The timing of your supplemental tax bill varies depending on where you live, but bills typically arrive 6 to 12 months after the triggering event. For example, if you purchased a home in January, you may not receive the supplemental bill until November or December.

This lag is due to the time it takes for the county assessor to reappraise your property and calculate the additional taxes. Be sure to budget for this tax bill for the year following a relevant change in home value rather than expect it immediately.

Does Escrow Pay Supplemental Property Taxes?

While your lender’s escrow account will pay your recurring annual property taxes as part of your monthly mortgage payment, supplemental tax bills are handled differently. Your escrow account will not pay a supplemental property tax bill for the following reasons:

• Supplemental taxes are one-time extra charges, not part of the annual taxes.

• Mortgage escrow accounts are only designed to pay regular predictable tax bills.

• Supplemental taxes are often levied months after changes in property value.

• Escrow funds are not set aside or budgeted to pay unpredictable extra taxes.

So in short, no, your mortgage escrow account administered by your lender will not pay your supplemental property tax bill. This is an extra tax you will need to pay directly as the homeowner.

What Happens If I Don’t Pay Supplemental Taxes?

It is essential to pay your supplemental tax bill on time because failure to pay will lead to penalties, interest charges, and serious consequences. If you do not pay on time:

• A 10% penalty may be added for late payment after the delinquency date.

• An additional 1.5% penalty per month will accrue if still unpaid.

• The county can place a tax lien on your home for unpaid taxes.

• Your home could face a tax sale if delinquent supplemental taxes are not paid.

• Your lender may force place payment from your escrow account to protect their interest.

Clearly, it is in your best interest to make sure supplemental property taxes are paid promptly! Allowing this bill to go delinquent puts your home and financing at risk. Stay on top of things by budgeting for supplemental taxes.

How Can I Pay My Supplemental Tax Bill?

When your supplemental property tax bill arrives, you have several options for making payment:

• Use personal funds from your bank account or savings.

• Pay online through your county tax collector website.

• Mail a check via USPS.

• Pay in person at the county tax office.

• Set up bi-annual or quarterly installments.

• Charge to a credit card (may incur fees).

• Take out a personal loan.

• Use home equity line of credit (HELOC) funds.

• Tap into homeowner’s insurance claims benefits.

• Coordinate payments via your escrow impound account (voluntary).

To avoid penalties, pay your entire supplemental tax bill by the due date. Partial payments are typically not accepted. Know your options to prepare for this extra expense.

How Can I Avoid Supplemental Taxes?

Since supplemental property taxes come as a surprise and financial burden to many homeowners, you may wonder how to avoid or minimize them from the start:

• Time a home purchase after the annual tax bill cycles to avoid mid-year assessments.

• Delay non-essential renovations and improvements until after tax deadlines pass.

• Appeal assessed value if you believe it is set too high.

• Claim eligible exemptions to reduce taxable value, like homestead exemptions.

• Request your mortgage servicer pay the bill through escrow voluntarily.

• Build up savings to create a dedicated supplemental tax fund.

With some planning and preparation, you can proactively reduce surprises when it comes to supplemental assessments. Know your rights and resources.

The Bottom Line

While your regular annual property taxes are paid from your monthly escrow account, supplemental property tax bills fall entirely on your shoulders as the homeowner. These one-time assessments come in addition to annual taxes and are not budgeted for in escrow payments.

By understanding what supplemental taxes are and how they work, you can avoid penalties and surprises. Build savings, know your payment options, and pay supplemental bills promptly. Your diligence will keep your property protected.