Westchester Property Tax Apportionments

For most people, buying and selling a home is something that only occurs a few times during their lives, so there are parts of the transaction that are unfamiliar and may seem confusing or complicated.

For example, title reports include information that identifies whether the seller is current on property taxes. In New York, homeowners pay property taxes to the local town and are usually split between (1) a general tax and (2) a school tax.

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The general tax is usually paid in one installment and the tax period mirrors the calendar year: January through December.

The school tax period usually runs July 1 through June 30 and is paid in two installments.

Because it is impossible for a closing to occur on the start or end date for both tax periods, either the seller is going to get a credit from the buyer for taxes already paid, or vice versa.

Here’s a basic example.

Jane is selling 31 Rose Drive. Her annual general tax is $1,200, which is $100 per month.

On April 1, Jane writes a check to the town for $1,200 to pay the general tax.

In May, Jane puts the house up for sale. In July, she accepts an offer from Jill. On September 1, Jane and Jill meet with their attorneys to close.

Because Jill is considered the owner of the home as of the day of the closing, Jill is responsible for the general tax from September 1 through December 31.

However, Jane already paid the general tax for the year. Just because the property is transferred from one person to another, the town isn’t owed the same tax again for September through December. And because towns are not in the habit of issuing refunds to sellers, Jill owes Jane $400 which is $100 per month for September through December, so the attorneys add $400 to the amount that Jill owes Jane at the closing.

The opposite occurs when the closing takes place before the tax is paid. For example, if Jane and Jill close on March 1, the situation reverses: Jill receives a $200 credit from Jane for the general tax not yet paid for January and February, thereby reducing the amount Jane is owed by $200. Subsequently, Jill will be responsible to pay the entire $1,200 tax due April 1.

Here’s an easy way to calculate who gets what when it comes to property tax apportionments leading up to closing.

• If the closing occurs after tax is paid, seller receives a credit.

• If the closing occurs before the tax is paid, buyer receives a credit. 

Either will be calculated by dividing the annual tax amount by 365 (or 366 days during a leap year) and then multiplying the daily tax rate by the number of days between the start of the tax period to the day before the closing.

Again, it’s not so much that apportioning taxes is complicated. Rather, it’s something that most sellers and buyers only have to do a few times during their lives, so it’s unfamiliar. Then again, it’s also part of the reason why the majority of people hire attorneys to help guide them through the real property process – to make sure they’re receiving that to which they’re legally entitled.

Give us a ring or email us and let’s talk about how we can help you buy or sell your next home.