How Property Taxes Are Split at Closing in Texas

Because Texas property taxes are paid in arrears, buyers and sellers usually split the current year’s taxes at closing. This property tax proration calculator shows who credits whom, and exactly how much, from your closing date and annual tax amount.

How property tax proration works in Texas

Texas property taxes are paid in arrears, meaning the bill for the current year is not due until the end of that year. The tax lien attaches to the property on January 1, appraisal districts set values in the spring, tax bills go out in October, and payment is due by January 31 of the following year. When a home changes hands mid-year, the buyer will eventually receive a bill that covers months when the seller still owned the home. Property tax proration is simply the fair split: each party is responsible for the portion of the year they owned the property.

The standard TREC contracts used in most Texas residential sales call for taxes to be prorated through the closing date. The title company calculates the split using the most recent tax information available. If the current year’s bill has not been issued yet, the proration is based on the prior year’s taxes, which is one reason the credit shown at closing is an estimate rather than a final settling of accounts.

Where does property tax proration appear at closing?

Look at the prorations or adjustments section of your settlement statement. When taxes for the year have not been paid yet, which is the most common situation, the property tax proration appears as a debit to the seller and a matching credit to the buyer. The seller is effectively handing the buyer their share of the year’s taxes, because the buyer will pay the full bill when it arrives. When the seller has already paid the full year, the entries reverse: the buyer is debited and the seller credited for the portion of the year the buyer will own the home.

The property tax proration is not a payment to the tax office. Nothing goes to the county at closing unless past-due taxes exist. It is a private adjustment between buyer and seller, handled on paper by the escrow officer, which is why it sometimes surprises sellers who expected to see a tax payment line instead of a credit to the other side.

Frequently asked questions

Who pays property taxes at closing in Texas?

Usually both parties, in proportion to how long each owned the home during the year. In the typical sale, taxes are unpaid at closing, so the seller credits the buyer for the seller’s share and the buyer later pays the full bill. The property tax proration calculator above shows the split for any closing date.

Why does the seller credit the buyer at closing?

In Texas, property taxes are usually paid at the end of the year. Since the buyer will receive the full tax bill after closing, the seller reimburses the buyer at closing for the portion of the year the seller owned the home.

What if the seller already paid the year’s taxes?

The credit flips. Because the seller prepaid for months they will not own the home, the buyer reimburses the seller at closing for the portion of the year from closing through December 31. Toggle the payment status in the calculator to see this case.

What happens if the actual tax bill is different from the estimate?

Prorations done before the October bills arrive are based on the prior year’s taxes. The standard TREC contract provides that when the actual amount turns out to be different, the parties adjust between themselves after closing. In practice, small differences are often ignored, but a large change in value or tax rate can justify settling up.

Does a homestead exemption change the proration?

It changes the size of the bill being prorated, not the mechanics of the split. A seller’s homestead exemption generally stays in place for the rest of the tax year, so the proration typically uses the exempted amount. Buyers should apply for their own exemption for the following year.

Are MUD, PID, and other special district taxes prorated too?

Yes. Municipal utility districts, public improvement districts, and other special districts levy property taxes that follow the same arrears schedule, so they are prorated the same way. Enter the combined annual total from all taxing units in the calculator for the full picture.

Planning a move?

Understanding tax prorations is only one piece of the puzzle. Explore our free calculators to estimate commissions, seller proceeds, and other closing costs before you buy or sell. And if you are thinking about selling, start with the number everything else depends on: find out what your home could sell for with our What’s My Home Worth tool.

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