Property taxes are billed for a whole year, but a home changes hands on a single day. Proration gives the seller the days before closing and the buyer the days after, and the difference shows up as a credit on the settlement statement.
How is property tax proration calculated?
Divide the annual property tax by the days in the tax year to get a daily amount, then multiply by the days each side owns the home. Many contracts treat the buyer as the owner on closing day, so the seller’s share runs through the day before. Some use a 360-day year or another method; your contract
When the current year’s bill isn’t out yet, the settlement agent usually prorates from last year’s bill or an estimate. The contract may say whether that’s final or gets adjusted when the
What’s the difference between arrears and advance?
Where taxes are paid in arrears, the bill for this year comes due late in the year or early the next. At closing the seller hasn’t paid for the days they owned the home, so the seller credits the buyer, who later pays the whole bill. Florida and Texas work this way; Florida’s taxes for the year are
Where taxes are paid in advance, the seller has usually already paid for time after closing, so the buyer reimburses the seller. New York, Pennsylvania and Washington generally bill ahead, often on a fiscal or school year rather than the calendar year. Some states, like California, collect in installments that fit neither label, and the split depends on which installments the
Who works out the proration?
The settlement agent or closing attorney works it out from the tax bill and the closing date and shows it on both sides’ statements. If the seller’s taxes are paid through an escrow account, the lender refunds whatever is left in that account after the loan is paid off. That refund is separate
Will the buyer’s tax bill match the seller’s?
Not necessarily. Some places reassess a home when it sells, and the seller’s homestead exemption or other exemptions belong to the seller, not the home. Buyers should ask what the bill will be for them and budget for it in
Example: a June 30, 2026 closing in Florida
| Annual property tax | $6,000 |
|---|---|
| Daily amount (365-day year) | $16.44 |
| Seller’s days (January 1 through June 29) | 180 |
| Seller credits the buyer | $2,959 |
| If paid in advance instead: buyer’s days (June 30 through December 31) | 185 |
| Buyer would reimburse the seller | $3,041 |
Florida taxes are paid in arrears, so the buyer receives the credit and pays the full bill in November. The last two rows show the same math where taxes are billed ahead. Both assume a calendar tax year and treat the buyer as the owner
Common mistakes
- Thinking proration is an extra cost. It only divides a bill each side owes for
their own time. - Assuming every place bills the calendar year. Many bill on a fiscal
or school year. - Budgeting from the seller’s tax bill when reassessment or lost exemptions
can raise yours. - Confusing the proration with the escrow refund the seller gets
from their lender.
Questions
Why did I get a property tax credit as a buyer?
In places that collect taxes in arrears, the seller hasn’t yet paid for the time they owned the home. The credit covers that share, and you pay the full bill when
What if the tax bill changes after closing?
Many contracts prorate on the latest known bill and treat that as final; others call for an adjustment when the actual bill arrives. Check your purchase agreement or ask
Are HOA dues prorated too?
Usually, yes. HOA dues, and sometimes utilities or rent on a tenant-occupied home, are split by the closing date
Sources
Written and checked by the Broker & Agent team on October 2, 2026. General information, not legal, tax or lending advice. Something out of date? Tell us.