When calculating prorations for property taxes at closing, which date matters most?

When calculating prorations for property taxes at closing, which date matters most?

• A. Closing date
• B. The date of recording
• C. The date of the original listing
• D. The date of the property appraisal

Answer: (A)

The date that matters most is the closing date because proration is all about splitting the tax burden for the portion of the tax year that the seller owned the property versus the portion the buyer will own after closing. Property taxes typically accrue daily, so you calculate a daily tax amount by dividing the annual tax bill by the number of days in the year, then multiply by the number of days the seller owned the home up to closing. The seller covers taxes up to closing, and the buyer covers taxes from closing forward, with the closing statement handling the debit/credit accordingly. The recording date, the listing date, and the property appraisal don’t determine the prorated amount; they don’t set the boundary for who owes which portion of taxes. For example, if the annual tax is $3,650 and closing occurs on a mid-year date, you’d allocate the days up to closing to the seller and the remaining days to the buyer based on the daily rate.

The date that matters most is the closing date because proration is all about splitting the tax burden for the portion of the tax year that the seller owned the property versus the portion the buyer will own after closing. Property taxes typically accrue daily, so you calculate a daily tax amount by dividing the annual tax bill by the number of days in the year, then multiply by the number of days the seller owned the home up to closing. The seller covers taxes up to closing, and the buyer covers taxes from closing forward, with the closing statement handling the debit/credit accordingly. The recording date, the listing date, and the property appraisal don’t determine the prorated amount; they don’t set the boundary for who owes which portion of taxes. For example, if the annual tax is $3,650 and closing occurs on a mid-year date, you’d allocate the days up to closing to the seller and the remaining days to the buyer based on the daily rate.