A California property was purchased five years ago for $400,000. It is now sold for $650,000. Under Proposition 13, the prior owner's assessed value grew at 2% per year. The base property tax rate is 1%. What is the approximate supplemental tax bill for the first year, prorated for 6 months?
Correct Answer
A) $1,042
Under Proposition 13 (Cal. Rev. & Tax. Code §75 et seq.), a supplemental tax is levied on the difference between the new assessed value and the prior assessed value at the time of transfer. The prior assessed value after 5 years of 2% annual increases is $400,000 × (1.02)^5 = $400,000 × 1.10408 ≈ $441,632. The new assessed value is the purchase price: $650,000. The difference is $650,000 − $441,632 = $208,368. The annual supplemental tax at 1% is $208,368 × 0.01 = $2,083.68. Because supplemental bills are prorated based on the number of months remaining in the fiscal year, a 6-month proration yields $2,083.68 × 0.5 ≈ $1,042. Note that Mello-Roos special taxes are not subject to Proposition 13 reassessment and are billed separately.
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