Closing adjustment that reallocates prepaid or unpaid property taxes between buyer and seller.
Property tax adjustment is a closing calculation that allocates municipal property taxes between the buyer and seller based on the closing date and who has already paid what.
Property taxes can materially change the final cash needed on closing. Buyers often meet this term on the statement of adjustments without realizing it is one of the reasons the final number differs from their earlier estimate.
If the seller has already prepaid property taxes for a period that extends beyond the closing date, the buyer may need to reimburse the seller for the buyer’s share after closing. If taxes are unpaid for a period that belongs to the seller, the calculation may work the other way.
The exact figure is usually prepared by the lawyer or notary and shown on the statement of adjustments. It is part of the final money balancing process rather than a separate stand-alone government fee.
| Driver | Why it changes the number |
|---|---|
| Closing date | The tax year is being split at that date. |
| What the seller already paid | Prepaid taxes can create a reimbursement from buyer to seller. |
| What remains unpaid | Unpaid taxes attributable to the seller can work in the buyer’s favour. |
| Local billing cycle | Annual, interim, and final billing patterns affect how the proration is calculated. |
| Lawyer or notary workflow | The presentation is legal-closing math, not a lender pricing feature. |
Assume annual property taxes are $4,800 and the seller already paid the full year. If closing happens on July 1, the buyer may need to reimburse the seller for the portion covering the second half of the year. That adjustment can add roughly $2,400 to the buyer’s final closing figure, depending on the exact local billing treatment and dates used.
Property tax adjustment is not the same thing as annual property tax itself. It is the allocation of that tax burden between buyer and seller at closing.
Borrowers also sometimes assume the lender determines this adjustment. In practice, it is usually handled through the legal closing documents rather than through the mortgage rate or approval terms.
The amount depends on the closing date, billing cycle, local tax records, and what has already been paid by the seller. Province and local workflow can affect how the adjustment is presented in the final documents.