Supplemental property taxes are additional taxes assessed on a property by a local government when there is a change in ownership or a significant improvement made to the property. These taxes are in addition to the regular property taxes that are paid annually.

When a property is sold or changes ownership, the assessed value of the property may be reevaluated, and a new property tax rate may be applied based on the new assessed value. The supplemental property tax is then calculated based on the difference between the old assessed value and the new assessed value, and the new tax rate.

Similarly, if a property undergoes significant improvements, such as adding a room or making other upgrades, the assessed value of the property may increase, and a supplemental property tax may be assessed based on the difference between the old assessed value and the new assessed value, and the new tax rate.

In California, for example, when a property changes ownership or undergoes new construction or improvements, the county assessor reassesses the property and determines its new market value. If the assessed value of the property increases as a result, the property owner will receive a supplemental tax bill, which is calculated based on the difference between the old and new assessed values and the local tax rate.

Consequently, the delay in determining the new assessed value can cause complications with an impound account, especially the longer it takes for the assessment to occur. In most cases, the new assessed value will be higher than the previous assessed value in which case a supplemental tax bill will be issued based on the difference in value.

For most new homeowners, the new assessed value occurs within the first 12 months of owning their home. Once the new value has been established, the county will send out a notification of the new assessed value and the supplemental tax bill which is typically due in two installments. From that point, the annual/monthly property taxes are set and can only increase based on the state allowance for property tax increase(s).