Short Answer
A prorated tax payment at closing is a credit between the buyer and seller for property taxes that have already been paid or are due for the current tax period. Since property taxes are paid in arrears, the seller credits the buyer for taxes they have already used but not yet paid. If taxes have been prepaid, the buyer reimburses the seller for the unused portion. This ensures each party pays their fair share of taxes for the time they owned the property.
Property tax proration is a standard part of the closing process. In New Jersey, property taxes are typically paid quarterly or semi-annually. The closing agent calculates how many days each party owned the property during the current tax period and adjusts accordingly. If the seller has already paid taxes for a period that extends beyond the closing date, the buyer reimburses the seller for the unused portion. If taxes are due but have not yet been paid, the seller credits the buyer for the period the seller owned the property. The proration is shown on your Closing Disclosure as a credit or debit. The calculation is based on the annual tax amount divided by 365 days, multiplied by the number of days each party owns the property. Your closing agent or attorney will handle the calculation and ensure it is accurate.
Bob's Advice
Redfin Senior Agent · AI Certified Agent
Property tax prorations can be confusing, but they are routine and handled by the closing agent. I always review the proration with my clients to make sure it looks right. The most important thing is that the tax amount used in the calculation is accurate. If the property was reassessed recently or if there is a tax appeal pending, it can affect the proration. I will ask the right questions and make sure you are not overpaying or under receiving on taxes.
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