Property Tax Proration Calculator
At a real estate closing, property taxes must be divided between the seller and the buyer based on how many days each party owns the home during the tax year. This is called proration. In most US states, property taxes are paid in arrears, meaning the seller owes taxes for the days they owned the property up to (but not including) the closing date. The buyer receives a credit on the settlement statement equal to the seller's share. This calculator computes the daily tax rate and the seller's prorated share based on your closing date and annual tax amount.
Property tax proration formula
Daily Tax = Annual Tax / 365
Seller Days = closing date - tax year start date
Seller Share = Daily Tax * Seller Days
Buyer Share = Annual Tax - Seller Share
The seller owns the property from the first day of the tax year through the day before closing (the closing date itself is credited to the buyer in most conventions). The daily tax rate uses 365 days per year; leap years use 366. The buyer receives a credit equal to the seller's share on the settlement statement.
Property tax proration at closing
- Taxes paid in arrears: seller is charged (or buyer credited) for days seller owned in the current tax year.
- Taxes paid in advance: buyer credits seller for the unused prepaid portion after closing.
- Proration convention (which party gets the closing day) is set by the purchase contract.
- Some states use a 360-day banker's year or 30-day months for proration; check local custom.
- The prorated credit appears on the Closing Disclosure (CD) and ALTA settlement statement.
Property tax proration: frequently asked questions
What is property tax proration?
Property tax proration is the process of dividing annual property tax between the seller and buyer based on the number of days each party owns the property during the tax year. At closing, the settlement statement shows a credit to one party and a debit to the other.
Who gets the credit at closing?
If property taxes are paid in arrears (most common in the US), the seller owes taxes for the days they owned the property up to closing. The buyer typically receives a credit for those days, which reduces the cash needed at closing. If taxes have already been paid in advance, the buyer credits the seller for the unused portion.
How is the daily tax rate calculated?
The daily tax amount = annual property tax / 365 (or 366 in a leap year). Multiply the daily rate by the number of days the seller owned the property during the tax year to find the seller's share.
What closing date is used for proration?
Convention varies by state and contract. In many states the closing day itself is credited to the buyer; in others it goes to the seller. Your purchase contract and local title custom determine this. The closing disclosure will reflect the agreed convention.
What if the annual tax amount is not yet known?
When the current year's assessment is not available, the proration is typically based on the most recent known annual tax bill. The contract may include a re-proration clause to settle any difference once the actual bill arrives.
Official sources
- Consumer Financial Protection Bureau: What is a Closing Disclosure?
- HUD: Buying a Home.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.