1. What is Property Tax Proration?

Property tax proration is the process of dividing property taxes between the buyer and seller at closing based on the number of days each party owns the property during the tax year. This ensures both parties pay their fair share of the annual property tax.

2. How Does the Calculator Work?

The calculator uses the property tax proration formula:

Where:

• \( \text{Annual Tax} \) — Total annual property tax amount ($)
• \( \text{Days to Closing} \) — Number of days from the start of the tax year to the closing date

Explanation: The formula calculates the daily tax rate by dividing the annual tax by 365 days, then multiplies by the number of days the seller owned the property during the tax year.

3. Importance of Tax Proration

Details: Proper tax proration ensures fairness in real estate transactions by accurately allocating tax responsibility between buyer and seller based on actual ownership periods during the tax year.

4. Using the Calculator

Tips: Enter the total annual property tax amount in dollars and the number of days from the start of the tax year to the closing date. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why is 365 used instead of 366 for leap years?
A: For simplicity and consistency, most real estate transactions use 365 days per year for proration calculations, regardless of leap years.

Q2: What if taxes haven't been assessed for the current year?
A: When current year taxes aren't available, use the previous year's tax amount or an estimated amount based on the most recent assessment.

Q3: How are partial months handled?
A: The calculator uses exact days, so partial months are automatically accounted for in the day count input.

Q4: Who typically pays the prorated taxes at closing?
A: The seller typically credits the buyer for the prorated tax amount for the period the seller owned the property.

Q5: Are there different proration methods?
A: While the 365-day method is most common, some jurisdictions may use a 360-day year or other methods. Always check local regulations.