Closing math · prorationsProperty tax proration at closing: who pays which days
Two rules work side by side. The purchase contract decides the money at closing: the Texas resale contract, for example, says taxes for the current year, interest, rents and regular maintenance fees, assessments and dues are prorated through the Closing Date, and if the current year's taxes turn out different from the amount prorated, the parties adjust when the tax statements are available (TREC 20-19, paragraph 13). Federal income tax law decides who may deduct what: the tax for the part of the year ending the day before the sale is treated as the seller's, and the part beginning on the date of sale as the buyer's (26 U.S.C. 164(d)) – regardless of local lien dates, and regardless of who actually paid the bill (IRS Publication 530). Each side can deduct its own share if it itemizes.
The two rules
The contract (money)
Sets the credit between buyer and seller on the settlement statement. TREC 20-19 ¶13: prorated through the Closing Date; adjusted later if the year's taxes differ; if taxes are not paid at or before closing, the buyer pays the current year's taxes.
Federal tax (deduction)
Seller: the days up to, not including, the date of sale. Buyer: from the date of sale. Applies even if one side paid the whole bill (26 U.S.C. 164(d)(1); Pub. 530).
IRS example (Publication 530)
Aug 15
Seller pays the bill
Calendar-year tax of $730 is due and paid by the seller.
Sep 1
Buyer buys
The buyer owns the home 122 days of the tax year, counting the date of purchase.
Tax return
Buyer's deduction
$730 × 122 ÷ 365 = $244 – deductible by the buyer if itemizing, even if the contract did not require reimbursing the seller.
What the TC checks before closing
- Which tax year and which bill the title company used, and whether it was already paid.
- Exemptions that will change the current year's taxes (TREC ¶13 allows taking them into account).
- HOA dues and assessments – prorated under the same paragraph in a Texas resale contract.
- Who will receive the next bill, so the buyer or the lender's escrow pays it on time.
Good to know
- Delinquent taxes from an earlier year that the buyer agrees to pay are not deductible; they become part of the cost of the home (Pub. 530).
- Transfer or stamp taxes are not deductible: the buyer adds them to basis, the seller treats them as a selling expense (Pub. 530).
- Through escrow, the deduction is what the lender actually paid to the taxing authority, not what went into escrow (Pub. 530).
- Other contracts word prorations differently – read the one on the deal.
Questions buyers and sellers ask
Who pays property taxes for the day of closing?
Under the contract, the settlement statement follows the contract's wording – the Texas resale contract prorates through the Closing Date. For federal income tax, the day of sale counts as the buyer's (26 U.S.C. 164(d)(1)(B)).
Can I deduct property taxes the seller paid before I bought?
You can deduct your share for the days you owned the home, starting with the date of purchase, if you itemize – even if you did not reimburse the seller (IRS Publication 530).
What if the tax bill comes in higher than what was prorated?
In a Texas resale contract the parties adjust the prorations when the current year's statements are available (TREC 20-19 ¶13). Other contracts have their own rule.
Related guides
ClosingCode keeps the tax certificate, the settlement statement and the post-closing tax adjustment on the deal as documents and dated tasks, so the follow-up is not forgotten.
Start free trialSources (read October 25, 2026): 26 U.S.C. 164(d) (govinfo); IRS Publication 530 for 2025 returns (irs.gov/pub530); TREC One to Four Family Residential Contract (Resale) 20-19, version 05-04-2026, paragraph 13.
General information, not legal, tax or financial advice. ClosingCode is software; it is not a law firm, tax preparer, lender or brokerage. This guide is not a substitute for the advice or services of an attorney.