Property taxes in arrears mean?

What does it mean when I am paying property taxes in arrears? What does pro-rata share mean?

Purchasing a home can seem overwhelming. Once the inspections are completed and the financing contingencies removed then it comes down to the closing day and the buyer and seller receive a closing statement that have credits and debits to both the buyer and seller. This is an oversimplification of a very involved process, but the purpose of this post is to explain what it means when property taxes in arrears are paid in arrears and are prorated.

This concept seems simple, many people, for good reason, find it confusing. When paying rent, normally it is due and paid on the 1st of the month and pays for the rest of the month. However, this is not the case for property taxes in arrears in Florida. The best way to understand this concept is through an illustration.

The homeowner, that pays his taxes in arrears, receives a property tax bill for on February 15, 2020 in the amount of $1,200.00. What does that mean? That bill, since taxes are paid in arrears, is for the tax year of 2019. If they paid the taxes in full at that time, they would be paying for taxes on the property from January 1, 2019 through December 31, 2019.

What happens if the same homeowner sells the home on July 1, 2019? Since the property taxes in arrears and the bill did not arrive for 2019 yet, the property owner did not pay the taxes for January 1, 2019 through June 30, 2019, (provided the closing and funding take place on the July 1, 2019, the day of closing the buyer owns the home), therefore, the seller has to pay for the taxes for the 6 months they occupied the home. This will be indicated on the closing statement as a credit to the buyer in the amount of $600.00 and debit from the seller for $600.00.

In this example, the taxes are prorated. That means that the taxes are divided proportionally to both the buyer and seller based upon the time they owned the home. Since the buyer will have to pay the taxes when the tax bill is due, the buyer will need to be compensated for the taxes that were due when he/she did not own the home.