Property tax proration at closing explained
How buyers and sellers split a yearly tax bill by day, why arrears versus prepaid billing flips the credit, and where local conventions differ.
Why a yearly bill gets split by the day
Property tax is levied for a whole tax year, but homes change hands on ordinary weekdays in the middle of that year. Proration answers a simple fairness question: each party should pay only for the days they actually owned the home. The mechanism is a daily rate, the annual tax divided by the number of days in the year, applied to each side's ownership period. A 3,650 annual bill on a 365-day year is 10 per day, so a seller who owned the home for 180 days is responsible for 1,800 and the buyer for the remaining 1,850.
Arrears versus prepaid changes who credits whom
Splitting the bill is only half the story; the other half is who has already paid. Many jurisdictions bill in arrears, meaning the tax for a year is collected after the fact. In that case the seller has enjoyed months of ownership without yet paying, so at closing the seller typically credits the buyer for the seller's share, and the buyer later pays the full bill. Where tax is prepaid at the start of the period, the flow reverses and the buyer reimburses the seller for the days the seller already covered. This calculator sizes each share by day but leaves the credit direction to your settlement statement.
Day-count conventions are not universal
The two common day counts are the 365-day calendar year and the 360-day banker's year of twelve 30-day months. A 360-day basis makes each month uniform, which some title companies prefer for round monthly numbers, while a 365-day basis mirrors the real calendar. The choice changes the daily rate: 4,800 over 360 days is 13.33 per day, while the same tax over 365 days is about 13.15. Contracts and local custom decide which applies, so set the days-in-year field to match rather than assuming a default.
Why the estimate and the closing figure can differ
This tool gives a clean, transparent split, but a real settlement can diverge for good reasons. The tax year may be fiscal rather than calendar, the proration date may be fixed by contract rather than the closing date, the closing day itself may be charged to either party, and unpaid or estimated tax amounts may be trued up later. Use the calculator to sanity-check the order of magnitude and to negotiate, then rely on your escrow or closing agent for the number that actually appears on the statement.