Who pays property taxes up to closing?
Who really pays property taxes up to closing? Read this first — buyer, seller, or both?
Short answer (featured-snippet ready):
- Property taxes are prorated at closing. The seller is responsible for taxes up to the closing date; the buyer pays for the period after closing. The seller is usually reimbursed by the buyer on the closing statement (Statement of Adjustments). Jurisdiction rules, paid-in-advance vs paid-in-arrears taxes, and mortgage escrow accounts can alter the math.
Why this matters in the closing process
Property-tax proration is a standard part of the closing process. It appears on the closing statement under adjustments, and it changes the net funds each party brings or receives at closing. Get this wrong and either the buyer or seller will overpay or under-collect.
How prorated property taxes are calculated (simple steps)
- Confirm the municipal tax year and whether taxes are paid in advance or arrears. Different regions handle billing differently.
- Find the annual tax amount on the latest municipal tax bill or assessment notice.
- Count days: seller pays for days owned up to and including closing date; buyer pays the rest.
- Calculate the daily rate: annual tax ÷ 365 (or 366 for leap year). Multiply by days owed.
- Show the amount as a credit to the seller and a debit to the buyer on the closing statement.
Common scenarios you’ll see
- Seller already paid the full year: Buyer reimburses the seller for the portion after closing.
- Taxes billed in arrears: Seller may owe the full year; the buyer receives a credit for the seller’s unpaid portion up to closing.
- Escrowed mortgage accounts (U.S.): Lender may require the buyer to fund an escrow; this is separate from closing proration.
- Closing mid-year: Proration is almost always used to split the bill fairly.
Exceptions and tricky points
- Local rules: Some provinces or states have special rules for leap years, billing cycles, or final municipal adjustments.
- Tax liens and arrears: If taxes are in arrears or there’s a lien, lawyers or title companies handle payoff before or at closing.
- Condos: Property taxes are separate from condo/maintenance fees. Don’t mix them up.
Actionable checklist for buyers and sellers
- Ask for the latest municipal tax bill before making or accepting an offer.
- Require a clear Statement of Adjustments at least 48 hours before closing.
- Have your lawyer or title company confirm tax proration and any outstanding tax liabilities.
- Clarify who pays any provincially/municipally charged final adjustments or penalties.
Final note — practical, no-nonsense advice
In the closing process, taxes are a math problem and a legal obligation. Proration protects both sides and is standard practice. For a fast, accurate closing and to avoid surprises, use an experienced realtor and lawyer who know local tax rules.
For hands-on help with proration and the full closing process in the Toronto area, contact Tony Sousa: tony@sousasells.ca | 416-477-2620 | https://www.sousasells.ca
