Who Pays Property Taxes at Closing in Florida?

Real estate closings in Florida involve numerous financial considerations, and understanding how property taxes are handled is a common concern for both buyers and sellers. These taxes represent a substantial financial obligation, and their proper accounting at the time of transfer is a significant aspect of the transaction. Allocating property tax responsibility ensures fairness between the parties involved in a property sale.

Florida Property Tax System Overview

Property taxes in Florida are assessed annually as of January 1st. Tax bills are typically mailed by county tax collectors around November 1st. Property taxes for a given year are payable starting November 1st and become delinquent if not paid by April 1st of the following year. This system means that property taxes in Florida are paid in arrears.

The Concept of Property Tax Proration

Property tax proration is the process of dividing the annual property tax bill fairly between the buyer and the seller. This division ensures each party pays for the portion of the year they owned the property. The need for proration arises because property taxes are paid in arrears, meaning the bill for the current year’s taxes is typically issued and due towards the end of that year. The property tax year in Florida aligns with the calendar year, from January 1st to December 31st.

Determining Property Tax Payments at Closing

Property tax proration at closing depends on the time of year. If closing occurs between January 1st and October 31st, before current tax bills are issued, the exact tax amount is unknown. In this scenario, proration is usually based on the prior year’s tax amount, and the seller credits the buyer for their share from January 1st up to the closing date. The buyer then assumes responsibility for paying the full tax bill when due later in the year.

Conversely, if closing occurs between November 1st and December 31st, after current tax bills are issued, the buyer typically reimburses the seller for taxes covering the period from the closing date through December 31st. Regardless of timing, these prorated amounts appear as debits or credits on the Closing Disclosure or settlement statement. It is customary in Florida to prorate taxes using the maximum early payment discount available, even if not paid until later.

Closing Agent Responsibilities and Special Situations

The closing agent plays a central role in calculating and accurate proration of property taxes. They are responsible for reflecting these adjustments correctly on the closing statement and facilitating the transfer of funds between parties. However, certain situations can affect the buyer’s future tax liability.

For new construction homes, the property taxes initially assessed might be based only on the value of the unimproved land. After the home is completed and sold, the property appraiser will reassess the property to include the value of the new structure, which can lead to a significantly higher tax bill or supplemental tax bills for the buyer in the following year.

A seller’s homestead exemption does not transfer to the new buyer. Buyers must apply for their own homestead exemption by the March 1st deadline to reduce their future property taxes, as the “Save Our Homes” benefit, which limits annual assessment increases, resets upon the sale of a property.