Who pays the property tax on a home for the year of sale?

Question

I sold a condo on the 2nd of January this year, and I was a bit taken aback when I got a property tax assessment for that property from the county for this year (this was not a bill just an assessment of the value of the property).

Who normally pays the property tax on the year of sale? I figured that I'd only be responsible for the first two days of this year, or at the most the first month of the year. However, receiving this notice I am now not so sure. Is this something the mortgage company settles at closing?

Answer 1

You will need to check the language of your sales contract. Most of the time, it will be written that the pro-rated property taxes will be part of closing costs. In general, If you've already paid taxes, then the buyer will pay you the pro-rated portion of that, from the closing date through the end of the year. If you haven't, then you would usually be charged the pro-rated amount to be held in the buyer's mortgage company escrow account, with the remainder being collected from the buyer at a later date.

For your income tax purposes, you can deduct that tiny amount of the paid property taxes from your income (assuming itemized deductions).

Doing some research on property tax for the state of Georgia brings up this interesting note:

If you owned property on January 1, you are responsible for the ad valorem tax for the entire year even if you sell the property on January 2. Georgia law does not allow a refund for partial year residents.

This leads me to believe that your sales contract would have it written in that the buyer paid you almost the entire year's property taxes in anticipation that you would be responsible for the property taxes, as you owned the property on January 1st.

Again, you should consult with the settlement attorney and review your contract.

Answer 2

My experience (two purchases, Ontario, Canada) is that the property taxes are paid by whomever is the owner on the date the tax bill comes due. The bill might be due before the owners even decide to sell.

However:

A part of the closing process is a Statement of Adjustments, in which various costs that span the tenure of two owners are split on a per-diem basis. In your case, there would have been a charge against you of 2/365 of the tax bill on this statement at the time of closing (if you hadn't paid any 2014 taxes)

The statement also includes things like flat-rate water bills, monthly cable bills, security system monitoring... All paid by one owner or the other, but split fairly on a per diem basis at the time of closing...

Answer 3

It is also possible that the settlement company didn't tell the local government where to send the new tax bill. This would worry me because what else was missed regarding filing the proper documents with the lenders and the local government. It could also be a problem with the local government.

Contact the settlement company or your attorney to get the issue resolved. If you owe the money you want to know; if the new owner owes the money they don't want to face a tax lien because the settlement company made a mistake.

Generally this is split between the parties based on the number of days each will own the home. At settlement the money should move from one party to the other based on what has been deposited into escrow and when the actual bills are due. For example the payment for the first half of the year due July 1st may be sent in June. If the settlement was in June The new owner would give money to the old owner. But if settlement was in early July Money would move the other way.

Answer 4

As pointed out by other posters, you need to check exact language of your settlement contract. In US, the answer depends on the state where this property is located. For example, in Michigan, one pays their real estate taxes for the current year, but in Illinois, one pays their taxes for the PRIOR year. This means that if you sold your property on January 2nd, 2014 in Michigan, as a seller, you are responsible for the portion of the tax bill for January 1st, 2014 only, and you will compensate the buyer for this amount via settlement provisions. In Illinois, as seller, you are responsible to make the payment in 2014 for tax year 2013. You will either make the full payment yourself or compensate your buyer via settlement funds. You will also compensate them for January 1st, 2014 portion as well.