Proration is the process of splitting property taxes between the buyer and seller when a home changes hands. Since property taxes cover a full year but sales happen on random dates, proration ensures each party pays for their portion of ownership.
At closing, the title company calculates how many days each party owned the property during the tax period and divides the tax bill accordingly. This amount appears on your closing disclosure as a credit or debit.
Proration methods vary by region. Some areas prorate based on the current year's actual taxes; others estimate using the prior year's bill.
Understanding proration prevents surprises at closing and helps you budget for your first year of homeownership.
Key points for buyers:
• You'll receive a credit for the seller's portion of taxes
• You're responsible for the full bill when it comes due
• Estimates may differ from actual — especially if the property was recently reassessed
For sellers:
• You'll pay your share at closing even if the bill isn't due yet
• Successful appeals before selling reduce your prorated amount
Both parties benefit from accurate, lower assessments.
A home sells on September 1 in Texas (where property taxes cover January 1 - December 31):
Annual property tax: $9,000
Seller owned: January 1 - August 31 (243 days)
Buyer owns: September 1 - December 31 (122 days)
Seller's share: $9,000 × (243/365) = $5,989
Buyer's share: $9,000 × (122/365) = $3,011
At closing, the seller credits the buyer $5,989 for taxes covering their ownership period. The buyer will pay the full $9,000 bill when due in January, but effectively only pays for their portion.
Both, proportionally. The seller pays for the period they owned the home; the buyer pays for the remainder. This is handled through proration credits on the closing disclosure.
Your proration was based on known or estimated taxes at closing. If taxes increase later (common after a sale triggers reassessment in California), you're responsible for the higher amount going forward. This is a good reason to appeal promptly.
Yes. Some states prorate based on the fiscal year; others use the calendar year. Some use actual taxes; others estimate based on prior years. Your closing agent or attorney will explain the local practice.