How are Property Taxes allocated at close of escrow?

Property Taxes in California are placed as a lien on a property July 1st of each year, and are for taxes for the period 7/1 through 6/30. These taxes are due and payable by 12/15 and 4/15 of the taxable year. At closing, property taxes are either allocated to the buyer or seller depending on the date of closing and the time that the last property tax payment was made by the seller.

For instance, if a property closed on October 1st, the seller, in all probability, has not yet made the first installment of taxes for the tax year that began July 1st. Therefore, the seller would owe taxes for the period from 7/1 through 9/30, or for 3 months, or 25% of the total property tax bill. This would appear as a credit owed to the buyer on the closing statement, reducing their closing costs, and as a debit on the sellers closing statement, decreasing the sellers net proceeds from the sale.

If the property, however was sold on 5/31 and the seller had paid both installments of property taxes which were due on 12/15 and 4/15, then the buyer would owe the seller for one month of taxes which had been prepaid by the seller, for the period from 6/1 to 6/30. This would appear as a debit on the buyer’s closing statement, increasing their closing costs, and as a credit on the seller’s closing statement increasing their proceeds from the sale.

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