Who Pays Property Taxes When Selling a House?

Selling a home can be a financial turning point but when it comes to closing costs, few line items generate more confusion than property taxes. At Zuazo & Associates, we believe that financial clarity leads to better decisions. This guide breaks down who is responsible for paying property taxes during a sale, how proration works, and what both sellers and buyers need to know.

Understanding Property Tax Responsibility During a Sale

When a property changes hands, property taxes are typically prorated between the seller and buyer. This means the total annual property tax is divided between the two parties based on how long each owns the property during that tax year.

The Standard Rule

  • Seller: Pays property taxes from January 1 to the closing date.

  • Buyer: Pays property taxes from the closing date to December 31.

However, these details can vary depending on the terms outlined in the real estate contract and local regulations. Escrow agents usually handle the calculations and ensure each party pays their fair share.

Real Estate Tax Proration: Explained with an Example

To understand how tax proration works, consider the following scenario:


Item Details

Closing Date June 15

Annual Property Tax $6,000

Seller’s Days of Ownership 165 days (Jan 1 – June 14)

Buyer’s Days of Ownership 200 days (June 15 – Dec 31)

Daily Tax Rate $16.44 ($6,000 / 365)

Seller’s Share $2,712.60

Buyer’s Share $3,287.40



These amounts are usually settled during the closing process, either by crediting the buyer or adjusting the closing costs accordingly.

What Happens If Property Taxes Are Already Paid?

If the seller has already paid the entire year’s taxes, the buyer will reimburse the seller for their prorated share. Conversely, if taxes are unpaid at the time of sale, the seller will typically be debited for their share, and the buyer's share may be collected in escrow.

Impact on Escrow Accounts

Many homeowners with mortgages have an escrow account, which holds monthly property tax contributions. At closing:

  • Sellers may receive a refund of unused escrow funds (within 30-60 days).

  • Buyers begin contributing to their own escrow account with the lender.

Understanding your escrow status can prevent surprises during or after the transaction.

Delinquent Taxes: A Hidden Risk

Unpaid property taxes can complicate or delay the sale. Title companies will require all outstanding taxes to be paid before closing. Sellers should:

  • Check with their county treasurer’s office.

  • Ensure all tax bills are current.

  • Resolve any disputes about assessments.

Working with a financial advisor or CPA early in the process can help uncover issues before they escalate.

Tax Deductions for Sellers and Buyers

Even if you sell mid-year, the IRS treats you as if you paid the taxes for the time you owned the home. This means:

  • Sellers may deduct property taxes up to the closing date (if they itemize deductions).

  • Buyers may deduct taxes from the closing date forward.

Keep in mind that the $10,000 cap on state and local tax deductions (SALT) applies through at least 2025.

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Can Property Taxes Be Negotiated?

Yes. Depending on market conditions and buyer-seller dynamics:

  • Buyers may ask sellers to pay the full year’s taxes.

  • Sellers might offer a credit to close the deal.

  • These decisions are contract-based and should be reviewed by your CPA or legal advisor.

Final Thoughts: The Importance of Financial Planning

Whether you’re selling a primary residence or investment property, understanding property tax responsibilities can avoid unexpected costs. At Zuazo & Associates, we guide clients through all aspects of a sale from capital gains planning to tax allocation.

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Need help navigating your next home sale? Contact Zuazo & Associates for expert support on property tax planning, deductions, and financial peace of mind.