A home changes hands on a Tuesday in June; the tax bill covers a whole year and belongs partly to two different owners. Proration is the arithmetic that keeps either of them from paying for the other's months: three numbers in, one daily rate, and a credit on the settlement statement. This page is how the split is figured, why the cash can flow in either direction, and the one clause that decides whether the estimate you closed on is the final word.
Property tax is assessed against the property for a full tax period, but ownership changes mid-period. Without a split, whichever side happened to receive the bill would owe tax for days they did not own the home. The purchase contract solves it the same way almost everywhere: each party bears the tax for exactly their days of ownership, and the closing agent enforces the split inside the settlement figures. The taxing authority is not a party to any of this — it bills the property as it always does; proration is purely how buyer and seller divide that bill between themselves.
The calculation needs three numbers: the annual tax amount, the length of the local tax year (calendar year in some places, a fiscal year such as July 1 to June 30 in others), and the closing date. Divide the annual amount by the days in the tax year — 365, or 366 in a leap year — to get the per-day rate; multiply by the days from the start of the tax period to closing for the seller's share, and the remainder is the buyer's. One labeled illustrative example only: on a $7,300 annual bill the daily rate is $20, so a closing exactly halfway through the tax year puts $3,650 of the year's tax on each side. Some local customs use a 360-day 'banker's year' instead; the closing agent's method is stated on the settlement figures and is worth a glance before signing.
The split is identical everywhere; the cash direction is not. Most places bill in arrears — the tax for a period comes due after the period has run — so at a mid-year closing the seller has paid nothing toward the current bill: the seller credits the buyer for the seller's share at closing, and the buyer pays the full bill when it arrives, the credit already in hand. Where taxes are collected in advance, the seller has prepaid days the buyer will own, and the buyer reimburses that prepaid share instead. Either way the settlement statement shows it as an adjustment: a credit on one side, the matching debit on the other, listed by tax type and the exact period it covers.
A closing cannot wait for a tax bill that has not been issued, so prorations are routinely figured on the most recent known bill or the assessor's current figures. That makes the closing number an estimate wearing a suit. The contract decides what happens when the real bill lands: with a reproration clause, both sides settle the difference on the same daily-rate method after closing; without one, where the contract declares the prorations final, the estimate stands even if the real bill moves. Sellers and buyers who skip that clause at signing are the ones surprised by it later — it is one sentence, and it is negotiable before signing and almost never after.
Homeowner HQ keeps the homeowner's side of the record straight between sales: your own agent's monthly updates track your home's value and equity, and the guides in this series cover the tax chain around a closing — how the taxes are calculated, when they are reassessed, and the supplemental bill that can follow a purchase. Proration is the closing-day member of that family: a small, exact split that rewards the homeowner who reads the settlement statement line by line, because the lines are where the estimate lives.
A tax proration is the closing-table split of the property tax bill between seller and buyer, made because a closing almost never lands on the tax year's boundary. The closing agent takes the annual tax amount, divides it by the number of days in the tax year to get a daily rate, and multiplies that rate by each side's days of ownership: the seller is charged for the part of the tax period up to the closing date and the buyer for the part from closing onward. The split then appears as a credit and a matching debit on the settlement statement — the Closing Disclosure on a financed purchase — so the money moves inside the closing arithmetic rather than as a separate payment between the parties. Other time-based charges are often prorated the same way at the same table: rents on a tenanted property, HOA dues and utility readings among them.
Both, in shares set by the closing date — but the direction of the cash depends on whether the bill has already been paid. Where taxes are billed in arrears and the current period's bill is still unpaid, the seller credits the buyer at closing for the seller's days, and the buyer later pays the whole bill when it comes due, having already received the seller's share. Where the seller has prepaid the bill past the closing date, the flow reverses: the buyer reimburses the seller for the days the buyer will own under that prepaid bill. Which day counts as the buyer's first is a contract convention — many contracts charge the seller through the day before closing — so the line worth reading before signing is the proration clause itself, not just the dollar figure it produced.
That is the normal case, not an error. Prorations are commonly figured from the most recent tax bill actually issued, or from an estimate, because the current year's rate and assessed value may not be final when the closing happens. If the real bill later comes in higher, the buyer was under-credited and the seller owes the difference on their share; if lower, the reverse. Whether anyone can collect that difference after closing depends on the contract: a reproration (or re-proration) clause obliges both sides to settle up when the actual bill arrives, while a contract that calls its prorations final leaves the closing figures standing. Separately, federal tax law fixes each side's deductible share by the date of sale regardless of the closing statement — under Internal Revenue Code section 164(d), the seller is treated as paying the taxes for the part of the year ending the day before the sale, and the buyer from the date of sale on.
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Almost never. It is the county's planned catch-up, not a duplicate of your regular bill: the regular bill for the year was figured on the previous owner's assessed value, and the supplemental bill charges the difference between that value and the value set when you bought, for the months of the fiscal year you own the home. It does not replace the regular bill — both are owed — and it should name your parcel and the change-of-ownership event that triggered it; check those two facts before you pay.
Because the escrow account was built before the bill existed. Supplemental bills are commonly mailed to the homeowner directly, not to the mortgage company, and a lender's escrow analysis runs on the regular bills it knows about. Many buyers pay the supplemental bill out of pocket in the first year and then see the regular escrow analysis adjust once the new assessed value reaches the annual roll. Forward a copy to your servicer after paying it, so the next analysis starts from the right number.
In the states that use them — California is the best-known — the assessor subtracts the old assessed value from the new one set by your purchase, applies the tax rate to that difference, and prorates the result for the months left in the fiscal year, counting from the first day of the month after the change of ownership. A purchase early in the fiscal year can produce two supplemental bills spanning two fiscal years; a purchase late in the year usually produces one. Where no supplemental system exists, the same catch-up simply lands in the next regular bill instead.
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