In a closing settlement statement, how will taxes be prorationed if the seller already paid them for the year?

In a closing settlement statement, when the seller has already paid the property taxes for the year, the proration process involves determining how much of the taxes should be allocated to the period before the closing date and how much to the period after. Since the seller has pre-paid these taxes, they are effectively entitled to be reimbursed for the period that the buyer will own the property and for which the seller has already covered the tax bill.

As a result, the closing statement will reflect a debit to the buyer, representing their obligation to compensate the seller for the prepaid taxes that apply to their ownership period. Conversely, it results in a credit to the seller, acknowledging that they have paid for services (in this case, taxes) that will benefit the buyer after the closing.

This proration ensures that both parties are equitably settled regarding the taxes for the period of ownership and accurately reflects the financial responsibilities resulting from the closing of the sale.