If a seller pays $3,600 in annual taxes on July 1 and closes the sale on November 15, who owes what to whom?

To understand who owes what in this situation, it’s important to consider how property taxes are typically prorated between the buyer and the seller at the time of closing. Property taxes are usually paid in advance, meaning the seller pays taxes in July for the entire year, covering the period from July 1 to June 30 of the following year.

In this case, since the seller paid $3,600 in annual taxes in July, the amount represents the taxes for the full year. When the property is sold on November 15, the seller is responsible for the property taxes up to the closing date.

Calculating the tax responsibility requires understanding how many days the seller owned the property before selling it. From July 1 to November 15, the seller owned the property for 137 days (31 days in July + 31 days in August + 30 days in September + 31 days in October + 15 days in November).

The annual tax of $3,600 translates to a daily tax of $9.86 ($3,600 divided by 365 days). For the 137 days the seller owned the property, this amounts to approximately $1,350.

As a result, the seller has prepaid for the full year