Property tax proration at closing

How proration works

The settlement agent divides the yearly tax into a daily amount and assigns days to each side. IRS Publication 530 describes the federal rule: the seller is treated as paying the property taxes up to but not including the date of sale, and the buyer is treated as paying beginning with the date of sale, regardless of local lien dates. Many closings follow the same split, but local customs vary. Some areas count the closing day for the seller, use a 360-day year or prorate on a fiscal year.

Arrears versus advance

Who credits whom depends on when the bill is paid.

Paid in arrears. In many places, taxes for a year are billed and paid after the period they cover. At closing, the seller owes for days they owned the home but has not paid. The seller gives you a credit for those days, and you pay the full bill when it comes due, often through your escrow account.

Paid in advance. If the seller has already paid the bill for the current period, you reimburse the seller for the days after closing.

Where to find it on your Closing Disclosure

The CFPB's Closing Disclosure explainer shows that adjustments between buyer and seller appear in the summaries of transactions on page 3. A credit to you appears under amounts paid by or on behalf of the borrower, reducing your cash to close. A reimbursement to the seller appears as an amount due from you.

Checking the math

1. Confirm the yearly tax. Use the most recent bill. If the current year's bill is not out yet, the agent may use last year's amount, sometimes with an agreement to adjust later.
2. Confirm the period. Calendar year, July–June fiscal year or another cycle.
3. Find the daily rate. Yearly tax divided by 365 (or the method your agent uses).
4. Count the days. Seller days run from the start of the period through the day before closing, unless local custom differs.
5. Multiply. Daily rate times seller days gives the seller's share.

Small differences usually come from day-count method. Large differences may mean the wrong tax amount, the wrong period or a missing exemption.

When the bill changes after closing

Proration uses the tax bill as it stands at closing. Your actual bills after the sale may differ. In some states a sale triggers reassessment. California's Board of Equalization, for example, explains that a change in ownership leads to a supplemental assessment and bill, separate from the regular bill. Exemptions the seller had may also drop off. Read our reassessment guide so a new bill does not catch you off guard.

The tax side

If you itemize, you can deduct the property tax that covers the days you owned the home. IRS Publication 530 says that you and the seller are each considered to have paid your own share, even if one of you actually paid the whole bill. Its example: a buyer who purchased on September 1 in an area with a calendar property tax year owned the home for 122 days, including the purchase date, and figures the deduction from that share. For 2026, property tax counts toward the federal limit on state and local tax deductions; see our property tax basics guide for the figures.

The bottom line

Proration splits the year's property tax so each side pays for its own days. If taxes are paid in arrears, the seller usually credits you; if paid in advance, you reimburse the seller. Check the yearly amount, the period and the day count on your Closing Disclosure, and plan for a possible change in your first full bill.