How does property tax proration work at closing, and who typically pays what?

• A. Proration determines which party pays taxes up to the closing date; usually seller pays through closing, buyer pays after closing, depending on local practice.
• B. Buyer pays all property taxes at closing.
• C. Seller pays all taxes after closing.
• D. Taxes are never prorated in Colorado.

Answer: (B)

Property tax proration at closing allocates tax liability between buyer and seller based on how long each will own the property during the tax year. In practice, the seller is responsible for the taxes for the portion of the year they owned the home up to the closing date, while the buyer takes on the taxes for the portion after closing. The amount is calculated by taking the annual tax bill, converting it to a daily amount, and multiplying by the number of days each party owned the property in that year. The settlement statement then shows these amounts as credits and debits so that each party pays only for their share. This means the buyer does not end up paying all the year's taxes at closing; they pay only their portion for the time they own the property, with the seller accounting for their portion up to closing.