What Are Prorated Property Taxes and How Do They Work at Closing?

Property taxes don’t take a break just because a home changes owners. That’s where proration comes in. Prorated property taxes divide the year’s tax responsibility between the seller and the buyer based on the exact number of days each one owns the home. It keeps everything fair and avoids either party paying more than their share.

In Florida, property taxes are billed once a year, typically in November, but they cover the entire calendar year. Most closings happen before the bill comes out, which means the taxes aren’t paid yet. To keep things even, the seller gives the buyer a tax credit at closing. This credit represents the seller’s share of taxes for the time they lived in the home from January 1 through the day before closing.

After closing, the buyer eventually receives the actual tax bill and pays it, using the seller’s credit to cover the portion that wasn’t theirs in the first place. If closing happens after the tax bill is already issued and paid, the direction of the credit flips. In that situation, the buyer reimburses the seller for the buyer’s portion of taxes.

The title company handles the math using the daily rate for that year’s taxes (or the most recent tax amount if the new bill isn’t available). Proration makes sure neither party gets stuck with a full year’s taxes when they only lived in the home for part of it.

While the process feels technical, it protects both sides and keeps the financial side of closing clean. A smooth tax proration is one of those behind-the-scenes details that helps a real estate deal wrap up without drama.

Bottom Line:
Prorated property taxes ensure buyers and sellers each pay only for the time they owned the home. The title company calculates the numbers, and the credit appears on the closing statement so the final tax bill is handled fairly.

If you want a clear walkthrough of your closing costs, including tax prorations, work with a Central Florida agent who explains the details before they ever hit your settlement statement.