Property tax proration is the quiet line on a settlement statement that confuses almost everyone, because it can be a credit to the buyer or to the seller depending on where you are. Let me explain how it works so the number makes sense when you see it.
Written by Adam L. Engel, Esq., Principal and real estate attorney at Prime Title & Escrow
The idea behind proration is fairness: each side should pay property taxes only for the part of the year they actually owned the home. The execution depends on your locality’s billing cycle, which is why the same closing date can produce a credit in one direction in one county and the other direction in another.
Property taxes are prorated between the buyer and the seller as of the closing date. The seller is responsible for taxes through the day of closing, and the buyer from then on. Whether the adjustment is a credit to the buyer or to the seller depends on what the locality has already billed and what has already been paid. It appears as a single line on the settlement statement.
Why proration exists
A property tax bill covers a set period, but homes change hands in the middle of those periods all the time. Proration divides the bill at the closing date so neither party pays for time they did not own. Without it, one side would overpay and the other would get a free ride, so every closing settles it.
How the split is calculated
The proration is figured per day. We take the annual or semiannual tax, divide it across the days in the billing period, and assign each side its share based on the closing date. The seller’s share covers the days up to closing, and the buyer’s share covers the rest. The math is simple once we have the right tax figure and the right billing period for the locality.
Why the credit can go either way
Here is the part that surprises people. If the locality bills for a period that has already passed but has not been paid yet, the seller owes for their share and credits the buyer, who will pay the bill when it arrives. If instead the seller already paid taxes that cover time after closing, the buyer reimburses the seller for that portion. Both are normal, and which one applies depends entirely on the billing cycle and what has been paid.
Virginia jurisdictions do not all bill on the same schedule, and many bill semiannually. Loudoun County, for example, bills twice a year. Because the cycle drives the proration, I confirm the exact billing period and the current tax figure for your specific locality before I calculate, rather than apply a one size fits all assumption. This is one of the local details I pin down in any closing cost estimate.
A simple example
Suppose a home has a $6,000 annual property tax and you close exactly halfway through the tax year. The seller is responsible for roughly $3,000 covering the first half, and the buyer for the second half. If that period has not been billed or paid yet, the seller credits the buyer about $3,000 at closing, and the buyer pays the full bill when it comes. If the seller had already paid the whole year, the buyer would instead reimburse the seller about $3,000. The closing date and the billing status decide the direction.
Where proration fits your closing
Proration lands in the prepaid and adjustment section of your settlement statement, alongside your other closing costs. For buyers it folds into the cash to close, and for sellers it adjusts the net proceeds. Because it is small relative to the big items but easy to get wrong, I calculate it carefully for your jurisdiction.
Tax proration applies on residential and commercial closings across Virginia and West Virginia. The principle is the same everywhere, but the billing cycle and the figures are local, so the safe number is one I calculate for your specific property and locality.
Send me your closing date and locality and I will calculate your property tax proration so the settlement statement adds up.
Get Your Free Quoteor call (703) 552-4155Frequently asked questions
How are property taxes prorated at a Virginia closing?
Property taxes are split between buyer and seller as of the closing date. Each side is responsible for the taxes that cover the part of the period they owned the home, and the difference appears as a credit on the settlement statement. The exact split depends on the locality’s billing cycle.
Who pays property taxes at closing in Virginia?
Both, for their own portion of the tax period. The seller is responsible up to the closing date and the buyer from that point forward. Depending on what has already been billed or paid, the proration shows as a credit to one side or the other.
Are Virginia property taxes paid in advance or in arrears?
It depends on the locality, because Virginia jurisdictions bill on different cycles, often semiannually. That is why the direction and size of the proration credit vary by jurisdiction, and why I calculate it for your specific locality rather than assume.
What is a property tax proration credit?
It is the adjustment on the settlement statement that makes each party pay only for the time they owned the home. If the seller owes for time already passed but not yet billed, the seller credits the buyer; if the seller prepaid beyond closing, the buyer credits the seller.
What happens if my property taxes change after closing?
The proration at closing is based on the best available figures at the time. If the locality later changes the assessment or rate, the new amount is the new owner’s responsibility going forward, and the closing proration is generally not reopened.
This article is general information about property tax proration in Virginia and West Virginia. It is not legal, tax, or financial advice for your specific transaction, and billing cycles and figures vary by locality. Please confirm the numbers that apply to your closing with me directly.