Property Tax Proration Calculator

Wooden house with the words prroperty taxAre you looking for a simple and efficient way to calculate property tax proration? Look no further! In this blog post, we will introduce you to a handy tool - the Property Tax Proration Calculator. This tool will help you accurately determine the prorated amount of property tax you owe or are owed when buying or selling a property. Keep reading to learn more about how this calculator can simplify the process of handling property tax proration.

  PROPERTY TAX PRORATION
 
  Close Date          
     
                 
  COST   FROM   TO   Per Diem based on   Per Diem   Owned for    
  Local Tax                
  County Tax                
  School Tax                
  Other ____                
  Other ____                
  Other ____                
  TOTAL
   
  1. Enter the closing date with the drop down boxes    
  2. Enter the real estate taxes in the COST box    
  3. Enter the tax period (i.e. FROM - 7/1/2023 TO 12/31/2023)    
  4. Choose the Per Diem based on 365 or 366 days, or if you are estimating quarterly,    
  or semi-annual taxes based on the dates entered, choose Dates Entered    
  5. Choose Paid or Not Paid    
  6. Other - i.e. homeowners association proration, water, sewer, etc.    
  CLICK OUTSIDE THE BOX AFTER ENTERING VALUES    
     
  Examples are hypothetical. We can not and do not guarantee the applicability or accuracy in regards to your individual circumstances. I encourage you to seek personalized advice from qualified professionals concerning real estate financing and calculations. Copyright © 2024,William A. MacDonald All rights reserved      

What Are Prorated Property Taxes?

Prorated property taxes refer to dividing up a property tax bill so the buyer and seller each pay their fair share based on their period of homeownership for that tax year.

For example, say a home has $2,400 in annual property taxes. The sellers owned it for the first 150 days of the year before selling it. The prorated tax calculator would determine how much tax the seller owes based on the percentage of the year they owned the home (150/365 = 41%). 

The seller would owe $984 (41% of $2,400) and the buyer the remaining $1,416. Rather than the new owner paying the upcoming tax bill, the closing costs are adjusted so each party pays their prorated portion.

When Are Property Taxes Prorated?

Prorating property taxes comes into play anytime a home is sold and purchased mid-way through a tax year. The closing date determines how many days the buyer and seller owned the home that year.

At the closing transaction, property taxes are prorated for the current tax year, and then the buyer assumes responsibility for the total tax bill in the future.

How to Calculate Prorated Property Taxes

Figuring out each party’s share of property taxes requires just a few steps:

  1. Identify the home's total annual property tax amount (check online records or tax bill).
  2. Note the closing date when ownership transfers to the new buyer.
  3. Calculate the days the seller owned the home in the current tax year up to the closing date.
  4. Divide that number by 365 days a year to get the seller’s percentage of ownership.  
  5. Multiply the total tax amount by the seller’s ownership percentage to determine the prorated tax amount due.
  6. Subtract the seller’s portion from the total tax bill to get the amount owed by the buyer.

Prorated Property Tax Calculator

Rather than doing all those manual steps, you can simplify the process using an online prorated tax calculator:

  • Just input the total annual property tax amount, the closing date, and the date the seller oinitiallytook ownership. 
  • The calculator will automatically do all the days and percentages to estimate each party’s share of taxes.
  • Many real estate closing software programs also compute prorated taxes owed during settlement.

These tools provide instant estimates and let you play with different closing date scenarios to see the impact.

Examples of Prorated Property Tax Calculations

Let’s walk through some examples to see prorated taxes in action:

* A home has $3,000 in annual property taxes and is selling on May 15th. The sellers took ownership on January 1st. 

  • The seller owned it for 135 days out of the 365-day year, which is 37% of the year.  
  • Multiplying $3,000 taxes by 37% gives $1,110 in prorated taxes owed by the seller.
  • The buyer owes the remaining $3,000 - $1,110 = $1,890.

* A home with $2,400 annual taxes sells on August 25th. The seller purchased it on March 15th, the prior year.

  • The seller owned it for 164 days out of the 365-day tax year, which equals 45% of the year.  
  • 45% of $2,400 in taxes equals $1,080 the seller owes at closing. 
  • The buyer owes $2,400 - $1,080 = $1,320.

Benefits of Prorating Property Taxes

Prorating property taxes results in a fair allocation at closing. Buyers don’t pay taxes for days the seller owned the home, while sellers don’t get away with not paying their rightful portion. It provides a transparent transaction.

Knowing how prorated taxes work is essential for buyers and sellers when budgeting closing costs and understanding the settlement statement. Use a prorated tax calculator early on to estimate this expense.

Conclusion: Property Tax Proration Calculator

In conclusion, the Property Tax Proration Calculator offers a user-friendly solution for calculating property tax proration with ease and accuracy. By utilizing this tool, you can streamline the process of determining the prorated amount owed or due when dealing with property transactions. Whether you are a buyer or seller, this calculator can provide invaluable assistance in managing your financial obligations related to property tax.

Take advantage of this convenient resource to simplify your property tax proration calculations and ensure a smooth transaction experience. Don't let complex calculations overwhelm you - try out the Property Tax Proration Calculator today and make handling property taxes a breeze!