Property Tax Billings


Proration is a concept necessary in the transfer of real estate in Ohio, because real estate taxes are paid “in arrears.” In other words, the bills that were sent out in January, 2014 were actually for the tax period January,  2013 through June,  2013 taxes, and the bills that come out in June, 2014, will be for the tax period July 2013 through December 2013 taxes. Real estate property taxes are actually billed and assessed one year in arrears.  Ohio real estate taxes may be paid in two, semi annual installments.

Because of the payment in arrears phenomenon, the taxpayer is, in effect, paying taxes based on a non-current valuation of their property. Nonetheless, most real estate contracts contain a clause to the effect that “real estate taxes and assessments shall be prorated based on the latest available tax duplicate”.

For the sellers, it's very important to know how the sellers property taxes are reconciled at settlement. Depending upon your contract terms and  the month that you close, the current tax duplicate that is billed and due and payable at the time of closing, whether it be for the first half taxes for the prior year or the second half taxes for the prior year,  will be paid through closing, and the remaining taxes that will be billed and owed by the seller in the future will be prorated through the closing date. Depending upon if a current tax bill has been sent out, sometimes the escrow officer will NOT actually pay the county treasurer's office, as many sellers think.  The county treasurer will not accept any payment of taxes for future billings other than those shown on a current tax duplicate. The escrow officer will calculate the taxes the seller owes based on the current tax duplicate, and pay the current tax duplicate if due and payable and/or prorate the taxes through the closing date.  He will then deduct the seller's tax amount owed from the seller's proceeds of the sale and credit the buyer this same amount. This transaction will clearly be shown on the HUD-1 statement as a credit  to the buyer and a debit to the seller at closing. The HUD-1 statement outlines by whom, or to whom, every penny in the transaction is paid or earned.

Based upon the tax payments and tax prorations done at the time of closing, the next tax bill will most likely be the buyers's responsibility to pay. The next actual tax bill should go to the buyer.  In our area the treasurer only sends out one tax bill, so that would mean that if you received a tax bill for the property you have sold that means the buyer did not receive the tax bill to pay. If a closing should occur around the time that a tax bill is being sent out, you might receive that bill

If your taxes were included in your monthly mortgage payments, your lender will either reimburse you the balance in your escrow within 30 days after the payoff is received by them, or will deduct that amount from your actual payoff.