Prorated property tax splits the annual tax bill between the seller and the buyer according to the number of days each one owns the home. Property tax is assessed for a full year, but most home sales close somewhere in the middle of it. The closing statement works out a daily tax rate and uses it to decide who owes what. This guide covers the formula, two worked examples, and where proration shows up on the settlement.
The pro rata calculator on the homepage applies this formula with daily precision.
How the daily tax rate works
Take the annual tax amount and divide it by the number of days in the tax period. Most counties assess on the calendar year: 365 days, or 366 in a leap year. Some tax authorities run on a fiscal year instead, for example July 1 to June 30. The formula:
- Daily tax = annual property tax ÷ days in the tax period
- Seller's share = daily tax × days the seller owned the home
- Buyer's share = daily tax × days the buyer owns the home from closing onward
Ownership days for the seller run from the start of the tax period to the day before closing. The buyer takes over from the closing date itself. That one day matters, because it decides who pays for it.
Worked example: a March 15 closing
- Annual property tax: $4,800
- Daily rate: $4,800 ÷ 365 = $13.15
- Seller owns January 1 through March 14: 31 + 28 + 14 = 73 days
- Seller pays: 73 × $13.15 = $960
- Buyer pays: $4,800 - $960 = $3,840
Check the math: $960 plus $3,840 equals $4,800. The full year is covered, and each side pays only for the days they own the house.
When the tax year is not the calendar year
If the county assesses on a fiscal year that runs July 1 to June 30 and you close on September 30, the seller has owned the home for 92 days: 31 in July, 31 in August, and 30 in September. With a $3,650 annual bill:
- Daily rate: $3,650 ÷ 365 = $10
- Seller pays: 92 × $10 = $920
- Buyer pays: $3,650 - $920 = $2,730
Read the assessment dates on the tax bill before you plug numbers in. Using the calendar year when the county uses a fiscal year shifts up to six months of tax in the wrong direction.
How the closing statement settles it
Two situations cover most closings. If the seller already paid the full year in advance, the buyer credits the seller for the unearned portion at closing. If the tax is still unpaid and the bill will reach the buyer later, the seller credits the buyer for the seller's portion instead. Either way, each side walks away having paid for its own days.
Some counties bill in two installments rather than one. Proration still runs on days: each installment covers a fixed period, and the daily rate inside that period decides the split. The same day-count logic applies to any annual bill, as shown in our guide on how to calculate pro rata.
The three traps in prorated property tax
- Fiscal vs calendar year. The most common error and the easiest to check. The tax bill states its assessment period.
- Supplemental bills. Many states reassess the home at its sale price after closing and mail a supplemental tax bill to the new owner. That bill is separate from the proration and belongs entirely to the buyer.
- Escrow cushions. Lenders typically collect two months of tax in advance at closing. The first escrow analysis can look wrong when the servicer collects for a prorated year. Ask the servicer for the line items instead of guessing.
Split the tax bill yourself: enter the annual tax and the days each side owned the home. The calculator returns both shares, free and no signup.
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Who pays property tax when a home is sold mid-year?
The seller pays for the days from the start of the tax period to the day before closing. The buyer pays from closing day onward. The settlement statement calculates both shares from the daily rate.
How do you calculate the daily property tax rate?
Divide the annual tax by the number of days in the tax period. Use 365 for a calendar year, or the exact day count of a fiscal year. Multiply the daily rate by the days each party owns the home.
What happens if the seller already paid the full year's tax?
The buyer credits the seller for the unearned portion at closing. If the seller paid $4,800 for the year and the buyer will own the home for 292 days, the buyer reimburses $3,840.
Do I use the calendar year or the county's fiscal year?
Use whichever period the tax authority assesses. Counties that bill July 1 to June 30 must be prorated over those dates, not January to December. The assessment period is printed on the tax bill.
What is a supplemental property tax bill?
A separate bill issued after the county reassesses the home at its sale price. It goes to the new owner and is not part of the proration at closing, so it lands on top of the buyer's regular share.