How Many Months of Taxes Are Collected at Closing

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How Many Months of Taxes Are Collected at Closing

When it comes to closing on a real estate transaction, there are certain expenses and fees that need to be settled. One of these expenses is property taxes. Property taxes are typically paid annually, but at closing, a portion of these taxes may need to be collected to ensure a smooth transfer of ownership. The number of months of taxes collected at closing varies depending on the time of year and the jurisdiction.

In most cases, property taxes are paid in arrears. This means that the taxes for a particular year are paid the following year. For example, property taxes for the year 2021 are typically due in 2022. When the property is sold, the buyer assumes responsibility for the property taxes for the remainder of the year.

The number of months of taxes collected at closing is determined by calculating the number of months remaining in the current tax year. For instance, if the closing takes place in June, there would be six months left in the year. Therefore, six months of taxes would be collected at closing.

It’s important to note that each jurisdiction may have different rules and regulations regarding property taxes and the collection at closing. Some jurisdictions may collect taxes in advance, while others may collect in arrears. It is crucial to consult with a real estate professional or attorney familiar with local laws to determine the specific requirements in your area.

8 FAQs about How Many Months of Taxes Are Collected at Closing:

1. What are property taxes?
– Property taxes are levied by local governments to fund various municipal services such as schools, roads, and public safety.

2. Why are property taxes collected at closing?
– Collecting a portion of the property taxes at closing ensures that the buyer assumes responsibility for the taxes for the remaining months of the year.

3. How is the number of months of taxes determined?
– The number of months of taxes collected at closing is calculated based on the number of months remaining in the current tax year.

4. Are property taxes paid in advance or arrears?
– Property taxes are typically paid in arrears, meaning they are paid the year following the assessed year.

5. Can the number of months collected at closing be negotiated?
– In some cases, the number of months collected at closing can be negotiated between the buyer and seller.

6. What happens if the closing occurs near the end of the year?
– If the closing occurs near the end of the year, the buyer may be responsible for a smaller portion of the property taxes.

7. Are property taxes prorated at closing?
– Yes, property taxes are usually prorated at closing to ensure a fair distribution of the tax burden between the buyer and seller.

8. Is it necessary to consult with a professional regarding property taxes at closing?
– Yes, it is recommended to consult with a real estate professional or attorney familiar with local laws to ensure compliance with tax regulations and understand the specific requirements in your area.

In conclusion, the number of months of taxes collected at closing depends on the time of year and the local jurisdiction. It is essential to understand the rules and regulations regarding property taxes in your area and consult with a professional to ensure a smooth and compliant real estate transaction.
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