How the split is calculated
Every proration starts with a daily rate. Divide the annual tax by the days in the year, or the monthly dues and rent by the days in the month, then multiply by the days each party owns.
- Set the closing date. The seller owns the property up to, but not including, the closing day.
- Enter annual tax. The calculator spreads it across the year and credits the buyer for the seller's share when taxes are paid in arrears.
- Add HOA and rent. Both are paid ahead, so the seller credits the buyer for the days the buyer will own.
- Read the net. The result shows who owes whom on the settlement statement, line by line.
Where prorations go wrong
- Wrong tax period - Counties bill on fiscal years that do not match the calendar. Confirm which period the current bill covers before splitting it.
- Homestead exemption - An owner-occupied exemption may not carry to the buyer. If the county claws it back, the adjustment often lands on the seller at the next bill.
- Security deposits - Tenant deposits transfer to the buyer as a separate line, not as rent. Mixing them into the proration is a common closing error.
Frequently asked questions
What is proration at closing?
Proration splits a shared cost between buyer and seller by the day each one owns the property. If you close on the 15th, the seller owes 14 days of the month and the buyer owes the rest. Taxes, HOA dues, rent, and sometimes utilities are handled this way.
Why do sellers get a tax credit or a tax bill?
It depends on when the county collects. Where taxes are paid in arrears, the year’s bill covers time the seller occupied the home, so the seller owes the buyer a credit. Where taxes are paid in advance, the seller has already funded days the buyer will own, so the buyer owes the seller.
How is rent prorated when a tenant is in place?
Rent is collected in advance, so the seller has already received the full month at closing. The seller credits the buyer for the days after closing, and the buyer collects the next month’s rent. The tenant’s security deposit transfers to the buyer separately, not as a proration.
Do I use 365 or 360 days?
Residential closings almost always use the actual number of days in the year - 365, or 366 in a leap year - and the actual days in the month. A 360-day basis appears in some commercial and lender calculations, so check the contract if the numbers look off.
What about utilities and fuel oil?
Municipal utilities are usually billed directly and paid to the cutoff date. Fuel oil or propane in the tank is sometimes prorated at the closing, but it is not standard everywhere - it has to be written into the contract.
Does proration change with the closing date?
Yes. Every day you move the closing shifts the split. Closing late in the month usually reduces the buyer’s prepaid interest on the new loan while raising the rent or HOA credit - which is why sellers and buyers sometimes prefer different dates.
Estimates only. Proration conventions vary by state and by contract. Your settlement agent calculates the final figures - use this as a planning check, not a substitute.
