Property Tax Proration Calculator
Don't overpay property taxes at closing. Calculate exactly who owes what in seconds.
- Determine credits and debits accurately
- Handle prepaid taxes with ease
- Generate a printable settlement summary
Based on ALTA standards.
Enter your closing details below.
What Is Property Tax Proration
Property tax proration is the process of dividing property taxes fairly between the buyer and the seller based on the time each party owned the property during a specific tax period. Instead of the seller paying for the full year or the buyer taking on the entire burden immediately, the tax liability is split to ensure each party pays only for the days they occupied the home.
Why It Matters
This adjustment prevents the seller from paying taxes for months after they have moved out and stops the buyer from paying for time they didn't own the property. It is a mandatory line item on the Closing Disclosure (CD) and is critical for a fair settlement.
Components of Tax Proration
To calculate prorated taxes correctly, you must understand the specific inputs that drive the final adjustment number.
Annual Tax Amount
This is the total amount of property tax levied on the home for the fiscal year. You can typically find this figure on your most recent tax bill from the county assessor or tax collector's office.
Tax Year Start
Most jurisdictions use a calendar year starting January 1st. However, some areas use a fiscal year that begins in July or another month. Identifying the correct start date is vital for accurate day counting.
Day Count Methods
The method used to count the days in the month and year significantly impacts the calculation.
| Method | Description |
|---|---|
| Actual Days | Uses the specific number of days in each month (28, 30, or 31) and usually 365 (or 366 in a leap year) for the year. |
| 30-Day Month | Assumes every month has 30 days and a year has 360 days. This simplifies manual math but can slightly skew accuracy. |
How to Calculate Property Tax Proration
Transparency in real estate transactions builds trust. Understanding the math behind the tool ensures you know exactly where your money is going.
The Formula
Proration = (Annual Tax / Days in Year) × Days Occupied
How it works:
- Annual Tax / Days in Year: Calculates the daily tax cost.
- Days Occupied: The number of days the seller lived in the home during the tax year up to the closing date.
Worked Example
If the annual tax is $3,600 and the closing occurs on June 30 (Day 181 of a standard year):
- Daily Rate = $3,600 ÷ 365 = $9.86 per day.
- Seller Occupied Days = 181 days.
- Seller Responsibility = 181 × $9.86 = $1,784.66.
*Note: In a leap year, the daily rate is divided by 366, slightly lowering the cost per day.
How to Use This Tool
- Locate your annual tax bill from the county assessor's website.
- Confirm the closing date listed on your real estate contract.
- Select the appropriate day count method (Actual/360) as specified in your contract.
- Check if taxes have already been paid in advance by the seller and toggle the prepaid option if yes.
- Click calculate to view the Settlement Adjustment amount required at closing.
Understanding Your Results
Once you hit calculate, the result represents the exchange of funds between the buyer and seller to settle tax obligations.
Seller Credit (Result > 0)
The buyer will pay the full tax bill when it comes due. This result indicates the amount the seller must reimburse the buyer at closing for the months they lived in the home.
Buyer Credit / Debit to Seller
The seller has already paid the taxes for the full year. This result indicates the amount the buyer must reimburse the seller at closing to cover their future ownership.
Action Step
Ensure this prorated number matches line 404 or 504 on your Closing Disclosure (CD). If there is a discrepancy, ask your closing agent immediately.
Actual Days vs. 30-Day Month
Different states and real estate contracts prefer different methods for calculating time. Below is a benchmark comparison to help you understand the variance.
| Feature | Actual Days (365/366) | 30-Day Month (360) |
|---|---|---|
| Accuracy | High (Precise calendar math) | Lower (Artificial standardization) |
| Common Use | Most US residential transactions | Commercial loans, some states |
| Calculation Base | 365 or 366 days/year | 360 days/year (12 × 30) |
Why Prorations Vary
Even with a solid calculator, external factors can shift the final tax liability. Be aware of these variables.
Changing Assessments
If the county reassesses the property value mid-year, the estimated tax bill used for proration might differ from the actual bill generated later.
Homestead Exemptions
If the seller qualifies for a tax exemption (like Homestead) that the buyer does not, the prorated amount is usually calculated based on the lower (exempt) amount, but the buyer will face a higher bill later.
Closing Delays
Moving the closing date by even one day shifts the liability. A delay adds one more day of responsibility to the seller.
Common Proration Scenarios
Real estate transactions are rarely identical. Here is how tax proration applies in different situations.
Scenario A: Standard Sale
The buyer pays the upcoming tax bill in full. At closing, the buyer receives a credit from the seller to cover the seller's time in the property.
Scenario B: Seller Prepayment
The seller paid the full year's taxes in January. If they sell in June, the buyer owes the seller for July through December.
Scenario C: Short Tax Year
In rare cases where tax bills overlap or are due oddly, proration covers only the specific period mandated by local custom.
Limitations & Common Errors
Frequently Asked Questions
References & Resources
We adhere to standards used in US residential real estate to ensure accuracy.
- ALTA Best Practices — Prorations and Settlement Guidelines.
- IRS Publication 530 — Tax Information for Homeowners.
- Consumer Financial Protection Bureau (CFPB) — Understanding Loan Estimates and Closing Disclosures.
About the Author
Nithya Madhavan
Web developer and data researcher creating accurate, easy-to-use calculators across health, finance, education, and construction and more. Works with subject-matter experts to ensure formulas meet trusted standards like WHO, NIH, and ISO.