How to Prorate Real Estate Taxes

Buyers and sellers usually prorate real estate taxes based on the time each party owned the house.

Buyers and sellers usually prorate real estate taxes based on the time each party owned the house.

When you buy a house, very rarely do you set the closing date at the end of the real estate tax year. In some cases, you might not even be able to if you tried because different jurisdictions might have different real estate tax fiscal years. As a result, you and the seller must prorate the real estate taxes for the year to figure out how much you each will owe.

Count the number of days that you will own the real estate for each jurisdiction. Say you buy the home on July 30 and the school district real estate tax runs from July 1 through June 30. You'll own the home for 30 days for the school district tax. However, if the county tax runs from Jan. 1 through Dec. 31, you'll own the home for 212 days.

Divide the real estate tax charged by each jurisdiction by 365 to find the daily tax. Continuing the example, say the annual taxes are $1,095 for the school district and $1,825 for the county. Divide $1,095 by 365 to get $3 and $1,825 to get $5.

Multiply the daily tax rate by the number of days you'll own the property. In this example, multiply the school district rate of $3 per day by 30 days to get $90 and the county rate of $5 per day by 212 days to get $1,060.

Add the prorated portion of each tax to find your prorated real estate taxes. In this example, add $90 to $1,060 to find your prorated portion of the real estate taxes to be $1,150.

 

Photo Credits

  • SW Productions/Brand X Pictures/Getty Images