Do I Pay Property Taxes When Buying A New Home?
Property taxes are handled a bit differently when buying a new home and how they are handled depends on the time of year and whether or not the annual invoice has been paid by the Builder yet.
Typically, property taxes are pro-rated and an adjustment is done at closing so the homeowner only ends up paying for the portion of the year for which they have possession of the home.
If possession is earlier in the year, the property tax bills haven’t come out yet so the builder will actually give the homeowner a credit (lowering the amount you have to pay) because later that year the homeowner will be required to pay the full invoice. They essentially pay to the homeowner, the portion for which they owe.
If possession is later in the year (once the builder has already paid the annual property taxes) the homeowner will see an adjustment that requires they bring in more money to cover their portion of the annual invoice.
How much will I need to pay?
Example 1 – Annual Property taxes = $2400 and Builder has paid the invoice (possession date Oct 1)
The adjustment will show the annual amount being broken down into days and then multiplied by the number of days the homeowner will own the home in the year:
$2400 / 365 days x 92 days = $604.93 homeowner will owe the builder at closing
92 days is determined by taking calculating how many days there are from Oct 1st to Dec 31st (31 + 30 + 31).
Example 2 – Annual Property taxes = $2400 and Builder has NOT paid the invoice (possession Feb 28th)
$2400 / 365 days x 58 days = $381.37 builder will owe the homeowner at closing
58 days is determined by calculating how many days there are from Jan 1st to Feb 27th (31 + 27).
The homeowner will then be responsible to pay the entire bill when it arrives knowing the builder has already paid them their portion.