How should the proration of annual real estate taxes be handled if the closing is on April 15 and the seller owns the property?

When handling the proration of annual real estate taxes at closing, it is essential to calculate the correct amount that needs to be allocated between the seller and buyer based on the ownership period within the tax year.

In this scenario, if the property taxes for the year total $1,309.26 and the closing occurs on April 15, this indicates that the seller has owned the property for the first 105 days of the year (January 1 through April 15). The total number of days in the year is typically 365.

To determine the proration amount, first, calculate the daily tax amount by dividing the annual tax amount by the total number of days in the year:

Daily tax amount = Total annual taxes / Total days Daily tax amount = $1,309.26 / 365 ≈ $3.59 per day

Next, calculate the total tax liability for the time the seller has owned the property:

Seller's liability = Daily tax amount × Number of days owned Seller's liability = $3.59 × 105 ≈ $378.95

Since the closing occurs on April 15 and any real estate tax liability belongs to the seller up to that point, we now subtract the seller's liability from