How Property Taxes Work - Homeowner's Guide | Summary and Q&A

TL;DR

Property tax bills for the calendar year 2023 are being issued in North Carolina, and buyers and sellers must prorate the taxes based on the date of closing. Some counties offer an early pay discount, and sellers should ensure a zero balance before closing.

Key Insights

• 🎱 Property tax bills in North Carolina are issued for the entire calendar year, including bills for the year 2023 that are being sent out in August.
• 🧑‍🤝‍🧑 Sellers are responsible for paying property taxes until the closing date, while buyers are responsible for taxes after the closing date.
• 😚 Some counties offer early pay discounts, which can cause an influx of tax payments before closing, and sellers should ensure a zero balance before closing.
• 🚕 It is crucial for real estate agents to communicate with sellers about tax payment status to avoid any issues during the closing process.
• 😫 Property tax values have been set for the year, and appeal periods have passed in most counties.
• 🚕 Closing attorneys need to be 100% certain that taxes are paid to issue title insurance, and this may require remitting the tax payment if a zero balance is not reflected on the tax bill.
• 💁 Real estate agents should inform sellers about the option of handling tax payments on the closing statement instead of sending a check when there is no early pay discount.

Transcript

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Questions & Answers

Q: Why are property taxes being discussed now when tax season is in April?

The discussion is about property taxes, which are prorated on a calendar year basis, and the tax bills issued now cover the entirety of 2023. Tax season in April is for general income taxes, not property taxes.

Q: How are property taxes prorated between buyers and sellers?

The seller is responsible for paying the taxes from January 1 to the closing date, while the buyer is responsible for taxes from the closing date until December 31. Both parties can agree to prorate differently but must document it in writing.

Q: What happens if a seller has already paid their tax bill before closing?

In some counties, sellers may receive early pay discounts for tax payments. If the seller has paid the bill, the closing attorney needs to ensure a zero balance is reflected on the tax bill to issue a title policy.

Q: Why do property tax bills in North Carolina have an unusual due date?

North Carolina has its unique system for property tax bills, and the due date might seem uncommon. However, the bill can be paid by the given September date and is not considered late until the end of the year.

Summary & Key Takeaways

• Property tax bills for the year 2023 are being issued in North Carolina, and sellers and buyers must prorate the taxes depending on the date of closing.

• Some counties offer an early pay discount, causing an influx of tax payments before closing, making it necessary to ensure a zero balance for a smooth closing experience.

• It is important for real estate agents to communicate with sellers about the tax payment status to avoid any issues during closing.