Use this property tax proration calculator to estimate how much of the annual, quarterly, or semi-annual property taxes each party (buyer and seller) owes at closing. This proration calculator works for both calendar-year and fiscal-year tax schedules.
Just select your closing date, enter the local, county, and school tax amounts, and specify the tax period and whether the taxes have already been paid. The calculator automatically figures out the number of days owned and the daily (per diem) tax amount to determine each party’s share.
Property tax proration examples
Calendar Year Proration Example:
The property taxes for the year are $3,650, which comes out to $10 per day. Closing is on June 1st, and the seller has already paid the full year’s taxes.
- The seller lived in the home from January 1st to May 31st (151 days).
- The buyer will own the home from June 1st to December 31st (214 days).
To split the taxes fairly, the buyer reimburses the seller for their portion:
214 days × $10/day = $2,140.
So at closing, the buyer pays the seller $2,140 for the remainder of the year.
Fiscal Year Proration Example:
The school district charges $3,650 per year, which comes out to $10 per day. Closing is on June 1, 2009, and the seller has already paid the full year’s taxes.
- The school district’s fiscal year runs from July 1, 2008, to June 30, 2009.
- The seller lived in the home and is responsible for taxes from July 1, 2008, to May 31, 2009 (335 days).
- The buyer owns the home from June 1 to June 30, 2009 (31 days) and reimburses the seller for that period.
At closing, the buyer pays the seller for 31 days × $10/day = $310.
What does proration mean?
Proration means you're dividing something proportionally across time or based on usage. So if something is prorated for 6 months, then the original cost will be divided equally among those six months. Proration comes up in real estate with taxes because the owner of the home only has to pay taxes for the portion of the year they owned the home. But the government is charging taxes on the home for the entire year.
For example, if property taxes are paid annually by the seller but the buyer takes ownership halfway through the year, the seller would be credited for the unused portion, and the buyer would pay the prorated portion. Proration ensures that each party pays only for the period they actually own the property.
Why property tax proration matters
Property tax proration ensures that buyers and sellers each pay only their fair share of taxes for the time they own the home. Since property taxes are billed annually (or semi-annually), the closing date usually falls in the middle of a tax period. Prorating divides the bill based on how many days each party owns the property, preventing one side from overpaying.
Understanding how tax proration works can help you do the following when buying your house:
—Avoid surprises at closing by knowing what you’ll owe or be reimbursed for.
—Budget accurately for upfront and ongoing homeownership costs.
—Verify your closing statement to make sure the math is correct.