Thinking about selling a house in Texas typically raises questions about property taxes and who is responsible for them. This is a good question, since real estate transactions normally have several moving parts. When considering closing costs, the closing date, and current-year tax obligations, it’s easy to become confused or overlook a detail.
That’s why we’ve put together this guide on who pays property taxes when selling a house in Texas. Generally speaking, both the buyer and seller share property tax responsibility, so the devil’s in the details. We’re going to look at how property taxes work in Texas, and exactly who pays what, when.
Understanding How Property Taxes Work in Texas
Texas doesn’t impose an individual income tax at the state level. This means property taxes are a major source of revenue for local governments. These are the taxes that keep schools open, emergency service infrastructure in place, and fund community projects. Each year, a property tax assessment assigns your home an assessed value. This is what local taxing authorities use to calculate your property tax bill.
Your total property taxes cost depends on both the tax rate for your county and the home’s assessed value. Property taxes in Texas are not based on fair market value.
Property owners receive their tax bill near the end of the year, and payments are due no later than January 31 of the approaching year. Since the tax bill covers the calendar year, the amount that’s owed at closing depends on how many days of that year each party owns the property.
Remember that property taxes are just part of the total closing costs that impact your bottom line as a seller. At the same time, many of those closing costs are counted as deductible expenses, which can be a perk for tax purposes.
Who Is Responsible for Paying Property Taxes When Selling a House?
In Texas, both the buyer and seller share property tax obligations through a process called proration. The seller pays taxes for the portion of the year they owned the home, while the buyer assumes responsibility starting from the closing date and moving forward. This ensures both sides pay their fair share for the year’s taxes.
For example, if a home sale closes on July 1, the seller’s share covers January through June, and the buyer takes over for the remainder of the tax year. The title company or closing agent calculates these prorated taxes and records them on the settlement statement, ensuring the math is accurate.
Also, since property tax rates and payment schedules can differ from one county to another, the real estate contract should always clearly lay out who’s responsible for paying each payment.
How Property Taxes Are Split Between Buyer and Seller at Closing
When a Texas home sale closes, from Ft Worth to Haltom City, the property taxes are split. They are divided between the buyer and seller, based on how long each one lives there that tax year. This is called proration, and paying a prorated amount keeps things fair.
During the sale transaction, the title company or possibly the closing agent will calculate the prorated amount of taxes. They’ll use the most recent property tax assessment or an actual tax bill. Those numbers are added to the settlement statement. There, the buyer’s share and the seller’s share are specified in detail.
For example, imagine your closing date is scheduled in September. You, as the seller, cover taxes from January 1 through August 31. The buyer is then responsible for paying property taxes from September 1 through the end of the year.
To ensure there’s no confusion, the purchase agreement and sales contract should specify exactly how the taxes will be split at the closing table.
Do Sellers Pay Property Taxes at Closing in Texas?
During the average home sale, the seller pays taxes for the time they owned the property. In most cases, this is from January 1 up to the closing date. It may be rounded to the month or specified to the exact day. Either way, it’ll be notated as a debit on the settlement statement.
This means it will reduce the seller’s net proceeds. However, the buyer receives a credit for their portion of the prorated taxes. This makes sure that each side covers its fair share.
The closing agent or real estate agents will typically handle these details, but it’s still important to know how things work. This includes how the taxes appear on the final paperwork. The funds are generally deducted from the proceeds, so the seller doesn’t have to make a separate payment.
These calculations are all part of the standard closing process. They’re based on the financial obligations outlined in the real estate contract. Sellers of rental properties who want to simplify this step and close without the stress of tax confusion can find strategies for how to minimize tax impact.
How Property Taxes Are Handled Through an Escrow Account
Property taxes are usually paid through an escrow account. This account is set up during the sale process by the mortgage company. Every month, the monthly mortgage payment contributes a portion of the property taxes.
That portion is set aside for covering property taxes and homeowners’ insurance. When the year’s taxes are due, the mortgage company uses those funds to make property tax payments on the homeowner’s behalf.
When you sell your home, your lender conducts an escrow analysis. This determines if the account has a positive or negative balance. If you’ve overpaid, you get the overpayment refunded from escrow funds at closing. If the account is short, the balance may be taken from the sale proceeds.
Using escrow prevents the need for large lump sum payments. It also helps most homeowners stay current on their tax obligations. However, it’s still critically important to double-check that your mortgage company actually pays the tax bill on time during the closing process.
If you own a property and you’re still on the fence about whether to sell or rent it out, there are pros and cons to both. Be sure you’ve covered all your bases before committing to anything.
What Happens if Property Taxes Are Delinquent Before the Sale?
No matter what, before any home sale can close, all unpaid taxes need to be settled in full. This won’t necessarily be on the buyer and seller, though. The title company and the real estate attorneys are typically responsible for confirming that all tax obligations have been satisfied.
If there are remaining past due amounts, the closing agent will use proceeds from the sale to pay the actual tax bill. The step ensures the buyer is buying a title free and clear.
If the seller owned the property during the tax year when the taxes went unpaid, they’re usually responsible for paying that amount at closing. This amount will appear on the settlement statement under the seller’s deductions.
Can You Get a Property Tax Refund After Selling Your House?
In some cases, you may be able to get a partial refund after closing. Typically, this applies if you’ve prepaid your property taxes for the year, then close on a sale before the year is out. Since property taxes are prorated, the buyer will credit you for the portion of the year they’ll be the homeowner.
If your mortgage company manages your escrow account, you may also get a separate refund from them. If there are funds remaining in the escrow account when it’s closed, they’ll mail those to you. This will generally be after all property tax payments have cleared.
Other Taxes and Closing Costs to Expect When Selling a Home in Texas
In addition to property taxes, sellers should prepare for several other closing costs that affect their total profits. These include real estate taxes, title fees, agent commissions, and document preparation charges. While not all of these are technically taxes, they still contribute to your overall financial obligations during the sale.
Your final tax rates and tax savings depend on the home’s purchase price, the fair market value, and your tax return for the year. It’s always wise to keep accurate records of every expense tied to the home sale, as some of these costs may be deductible for tax purposes.
Tips to Simplify Property Taxes When Selling Your House Fast for Cash
- Work with a cash buyer to skip lender delays completely.
- Confirm tax proration amounts early so you know your share.
- Coordinate with the title company and verify taxes paid.
- Review escrow account balances for refund or deduction accuracy.
- Trust Four 19 Properties for transparent, lightning-fast sales.
Final Thoughts: How Four 19 Properties Helps You Sell Without Tax Hassles
Four 19 Properties makes selling a house simple. Even if it comes with a tax burden. Our industry-leading team maintains close relationships with local title companies and closing agents. We’ll make sure all property taxes, tax payments, and other financial obligations are handled correctly and on schedule. Our entire goal is to get the streamlined sales process you want, with the fair cash offer you deserve.
Conclusion
The buyer and seller both shoulder their fair share of property taxes in a Texas home sale. While amounts are prorated, knowing how they’re handled at closing is key. If you’d rather cut the hassle of tax math out, partner with a local cash buyer. Local investors like Four 19 Properties are ready to help you get a fair offer and a fast closing, with zero stress. Reach out today to get started.