Property tax payments and the proration of taxes can often be a confusing aspect of real estate transactions in Sacramento. Whether you're a buyer or seller, understanding how property taxes are handled during escrow and beyond is essential. This post aims to demystify the process and provide you with a clear understanding of how it all works.

Understanding Property Tax Installment Periods in Sacramento

In Sacramento, the annual property tax bill is based on the fiscal year, covering the period from July 1st through June 30th of the subsequent year. While the tax bill is divided into two equal payments called installments, only one bill is typically issued each year, usually in early October. To gain clarity on debits and credits that you'll encounter on your closing statement, it's crucial to be aware of due dates and tax installment periods.

Here are the key dates for each installment:

FIRST INSTALLMENT:

• Period Covered: July 1st through December 31st
• Bill Due Date: November 1st
• Delinquent Date: December 10th (A 10% penalty applies if paid after this date)

SECOND INSTALLMENT:

• Period Covered: January 1st through June 30th
• Bill Due Date: February 1st
• Delinquent Date: April 10th (A 10% penalty applies if paid after this date)

Prorating Property Taxes in Sacramento

Property taxes in Sacramento are prorated during escrow based on the closing date. The tax payment status and installment period at the close of escrow determine whether the buyer or seller receives a credit or debit for the portion of the tax bill that is not their responsibility.

Taxes for the Seller:

• If the seller has not paid the tax installment by the time of closing, they will be charged the prorated portion for the period they owned the property within the current tax installment period.
• If the seller has paid both installments, the buyer will be debited for the portion they owe from the close of escrow until the end of the tax installment period.
• If a tax bill has not been issued by the time of closing, the seller will be debited for the period from July 1st until the close of escrow.

Taxes for the Buyer:

• If the taxes have already been paid or are being paid by the seller in escrow, the buyer will be debited for the period from the close of escrow until the end of the installment period. Essentially, the buyer reimburses the seller for their portion of the bill paid in advance.
• In cases when the tax bill has not been issued, the seller will be charged for the prorated portion of the previous bill, and the buyer will receive a credit in escrow. The buyer becomes responsible for the entire bill once it is issued, typically in early October.

Important Information About the Current Tax Bill

The annual tax bill is issued only once per year, even though it covers two separate installments. In most cases, escrow pays only the installment period relevant to the close of escrow, unless otherwise required by the lender. It's crucial to note that the buyer will not receive an updated bill after closing. Once the bill is issued in the seller's name, it will not be reissued or sent to the buyer. Any tax bills due after the close of escrow, even if they reflect the seller's name, are the buyer's responsibility. Buyers can access their tax bill information through the San Mateo County Tax Collector website using the Assessor's Parcel Number (APN) or property address.

Supplemental Tax Bills in Sacramento

Supplemental tax bills in Sacramento are issued when certain events trigger a reassessment of property taxes. Buyers will receive a supplemental bill based on the new valuation of the property, which is assessed according to the new sales price. These bills are issued several months after the close of escrow and will reflect different due dates and delinquent dates from regular tax bills. Be prepared to receive a supplemental bill, and remember not to discard it when it arrives.

Title companies provide forms in the closing documents to convey information about tax bills and supplemental bills. Your escrow officer will offer further clarification and explanations as needed, ensuring you have a comprehensive understanding of the process.

For specific questions regarding your closing statement or property taxes, please reach out to your escrow officer or consult with a qualified CPA. Remember, understanding property taxes is crucial for a smooth real estate transaction in Sacramento.