In most cases, taxes apply to a specific individual and cover the duration of a tax period, generally one year. However, in the case of property tax, which only applies to property that a taxpayer owns, government tax agencies or sellers may allow eligible individuals to save money by paying prorated taxes.
Prorating any payment, including taxes, involves dividing the full amount due by a portion of a period of time. For example, a $100 tax bill that covers one year would have a prorated six month value of $50 and a prorated 8 month value of $66.67. Prorated taxes can only occur when a taxpayer's liability reduces for some reason; in the following tax year, the taxpayer will be responsible for paying the full amount.
Property Tax Basics
State and local governments, along with municipal districts, impose property tax on residents based on the value of their property. Different municipalities impose property tax differently; some only levy property tax on real estate, while others impose property taxes on vehicles and other forms of personal property. Because a resident may only own a piece of property for part of a year, either before selling it or after acquiring it, governments will allow for prorated taxes.
Video of the Day
Brought to you by
Related pageshow to prepare a retained earnings statement example noncallable bond apply for city bank credit card what is the cvv2 number how to sell stock certificates reserve for bad debts journal entry how to calculate annualized return amscot check cashing fees florida when are w2 mailed home loans for minorities fica ss tax annuity early withdrawal penalty writing autobiography template difference between ssi and ssa paypal with prepaid visa convert daily interest rate to annual grants for school uniforms papa murpheys coupons application for bursary letter what is a cease and desist letter to creditors does fafsa check your bank accounts walmart money order refund market value adjusted annuity proration real estate definition irs accepting returns how to calculate total stockholders equity benefits for legally blind elderly how to retitle a car novated lease interest rate how much is a root canal and crown with insurance 400 mad to usd equity dividend rate formula what is a corrected w2 where to find bond serial number what percentage of tax is taken from paycheck is cigna hmo or ppo how often do credit bureaus update scores stream international chilliwack self directed brokerage account define churning in insurance morgan silver dollar worth african american poetry contest oasdi limit calculating per diem interest gift synonym are credit unions non profit taxi cab vouchers upside down refinance meaning of debt securities can student loans be garnished for child support federal adjusted gross income on w2 activate my santander credit card short term bonds vs long term bonds equilibrium level of income can a va loan be assumed aarp complete healthy debt to income ratio bank deposits reported to irs adptotalpay what is a hipaa certificate calculate amortization expense sps select portfolio servicing irs rules on donations can i efile if i owe taxes how long do you have to have an sr22 standard deduction over 65 2013 exempt on w4 time warner cable package deals hrblock appointment lost ebt card michigan cvp cost accounting new car buyers remorse illinois link card application status
One area where you can prorate your taxes is in real estate. If you buy or sell a home, you and the other party can decide to prorate the taxes in any manner you choose. Some states, such as Michigan, supply guidelines for prorated real estate property taxes, using the closing date as a cutoff for determining liability. Since the new owner will occupy the home when the next tax bill comes, and the previous owner paid the last property tax bill, either party can pay a prorated amount based on the date of the tax bills and the date of the sale. The higher a real estate sale's price is, the higher the tax liability is likely to be, making a prorated determination even more important.
When municipal governments and agencies charge levy property taxes on the value of personal property, they generally allow property owners to pay prorated taxes based on partial year ownership. For example, in Loudon County, Virginia, taxpayers are only responsible for prorated tax based on the number of months the property they own was within the county's borders. States and counties may exempt certain personal property, such as airplanes and mobile homes, from proration.