Most first-time buyers plan for the down payment and the mortgage and meet property tax later. It is one of the largest monthly costs of owning a home, and in the first year it comes in more than one piece. Here is what to expect and how to put it in your budget.
Buyer Basics
Property Tax for First-Time Buyers: Budget It Before You Bid
The property tax costs that catch first-time buyers out, from the first-year supplemental bill to the impound account, with worked numbers for San Diego.
The four property-tax costs in year one
- Proration at closing. Escrow divides the current tax bill between the seller and you based on the closing date, so part of it shows up in your cash to close.
- Prepaid taxes. Lenders commonly ask you to fund a few months of property tax into an escrow account at closing.
- The regular bills. Two installments a year, due November 1 and February 1 (delinquent after December 10 and April 10), often paid from the escrow account.
- The supplemental bill. A separate bill for the difference between the seller’s old assessed value and your new one, for the part of the fiscal year after closing.
The closing cost estimator includes the first two; the last two come afterward, which is why they surprise people.
Worked example
The base tax at today’s typical San Diego price
A first-year bill and how it could change, using the metro-area typical value.
A first-year bill and how it can change
Assumes a purchase at the typical home value in the San Diego metro area ($930,785, Aug 2026), a base rate of 1.00% plus 0.15% of assumed voter-approved charges (1.15% in all), assessed value rising at the 2% cap, and, for comparison, a market value rising 3% a year. An illustration, not a forecast.
| When | Assessed value | Estimated bill | Market value at 3% | Bill if reassessed then | Assessed-to-market gap |
|---|---|---|---|---|---|
| Year 1 | $930,785 | $10,704 | $930,785 | $10,704 | $0 |
| Year 2 | $949,401 | $10,918 | $958,708 | $11,025 | $9,308 |
| Year 3 | $968,389 | $11,136 | $987,470 | $11,356 | $19,081 |
| Year 5 | $1,007,511 | $11,586 | $1,047,607 | $12,047 | $40,095 |
| Year 10 | $1,112,374 | $12,792 | $1,214,463 | $13,966 | $102,089 |
The first-year bill on $930,785 is about $10,704 ($892 a month). Because the assessed value can rise only 2% a year, in this illustration the bill in year 10 is about $12,792, while a buyer who purchased that year at the higher market value would start at about $13,966. Special taxes such as Mello-Roos, the homeowners’ exemption and any temporary reductions are not included.
Worked example
The supplemental bill, step by step
How the difference between the old and new assessed value becomes a bill after you close.
From a new value to a second bill
Take $930,785 as the price (the typical home value in the San Diego metro area) and $560,000 as the old assessed value, an assumption for illustration. At 1.15%, here is how the difference is billed. Your county’s calculation controls.
| Step | Result |
|---|---|
| New value at purchase | $930,785 |
| Old assessed value | $560,000 |
| Supplemental assessed value (difference) | $370,785 |
| Annual tax on the difference at 1.15% | $4,264 |
| Closing | Months taxed | Approximate supplemental tax | Why |
|---|---|---|---|
| Closing in October | 8 months | $2,843 | From the first of the following month (November) to the end of the fiscal year on June 30 |
| Closing in March | 15 months | $5,330 | The rest of the current fiscal year (April to June, 3 months) plus the whole next fiscal year (12 months) |
Think of it as a second bill for the same year, on the new value. Regular installments are typically paid from escrow when a lender collects taxes; the supplemental bill frequently goes straight to the owner. Confirm with your lender and title company how yours will arrive.
How to build it into your budget
- Use about 1.1% to 1.25% of the price a year as a first estimate, and more if the home is in a community with special taxes such as Mello-Roos.
- Set aside the supplemental estimate as a separate savings goal.
- Include the tax in the monthly payment when you compare homes, using the payment calculator.
- Ask the seller’s disclosures and your title company for the exact tax and any special taxes on each home you are serious about.
If you will live in the home, file for the homeowners’ exemption, which reduces assessed value by $7,000 and is claimed once with the county assessor (Form BOE-266); the first claim is due by February 15 for the full exemption that year.
Common questions
Why is my tax bill higher than the seller’s?
A sale resets the assessed value to the price you paid. The seller’s bill often reflects a purchase made years ago.
Does an escrow account cover everything?
It usually covers the regular bill. A supplemental bill is often mailed to the owner, so ask your lender how yours will be handled.
What if the tax is more than I expected?
Compare it with the estimate before you remove your contingencies, and ask your lender to recalculate the monthly payment.
Where can I learn more?
The San Diego County Assessor and Treasurer-Tax Collector explain assessments, exemptions and payment dates.
Keep exploring
- The first-time buyer guide — The whole process, step by step.
- Property tax estimator — Try your own numbers.
- How much can I afford? — Income, debts and savings.
- Costs beyond the down payment — What else to plan for.
Talk to a lender. Rates, loan programs and approvals come from lenders, not from websites or real estate agents. Talk to your own mortgage broker, or use our preferred lender, Point Mortgage Corporation (NMLS #231073), at (619) 475-4095. You are always free to choose any lender you like, and you can verify any lender’s license at nmlsconsumeraccess.org.
Sources
- San Diego County Assessor: real property assessment
- San Diego County Treasurer-Tax Collector: secured property taxes
- California State Board of Equalization: homeowners’ exemption
- Public Policy Institute of California: Proposition 13, 40 years later
General information for orientation, not legal, tax, financial or appraisal advice. Details change; confirm anything that matters with the official source, your lender and your agent.