How are property taxes prorated at closing when selling my home? – North Carolina

Short Answer

In North Carolina, annual county and city property taxes are typically split between seller and buyer based on the closing date. The seller pays their share for the portion of the year they owned the home, and the buyer covers the rest. If the current year’s bill is not yet issued, closing usually uses last year’s rate to estimate, with the buyer paying the bill when it arrives. Prior-year delinquent taxes are paid in full from the seller’s proceeds.

Understanding the Problem

You’re selling a North Carolina property you co-own, and a small prorated tax amount will be deducted at closing. The key question is: how do the buyer and the two sellers split the current year’s property taxes as of the closing date? You also want to know if one seller can agree to cover the tax proration in exchange for the other covering different costs.

Apply the Law

North Carolina ad valorem property taxes are annual and become a lien on the property early in the year. The closing attorney allocates the current year’s taxes between seller and buyer as of the closing date. If the tax bill has not yet issued, the proration is typically based on last year’s rate and current assessed value; once the bill arrives, the buyer usually pays it subject to any contract terms about adjustments. Prior-year unpaid taxes must be paid at closing from seller funds to clear title. The settlement statement can allocate the seller-side proration between co-owners as they direct in writing.

Key Requirements

• Tax lien and timing: Property tax liens attach early each tax year and follow the property until paid.
• Proration method: Current year taxes are split as of the closing date; contracts control who pays the day of closing.
• Billing realities: If bills are not out, use last year’s rate to estimate; if issued, pay or adjust from seller proceeds at closing.
• Delinquencies: Any prior-year unpaid taxes are paid in full at closing from seller proceeds; they are not prorated.
• Allocation among co-owners: Absent agreement, the closing attorney usually divides the seller-side charge by ownership shares; co-owners may reallocate by written instruction.

What the Statutes Say

• North Carolina Gen. Stat. § 105-355 (Tax lien priority) – Property tax liens attach early in the year and have priority until paid.
• North Carolina Gen. Stat. § 105-321 (Due date) – Local property taxes become due in the fall each year.
• North Carolina Gen. Stat. § 105-360 (Interest and delinquency) – Taxes accrue interest after early January if unpaid.

Analysis

Apply the Rule to the Facts: At your cash closing, the settlement statement will debit the sellers for their share of the current year’s taxes through the closing date and credit the buyer. If the current bill is not out, the attorney will estimate using last year’s rate and assessed value and the buyer will pay the bill when issued. Between you and your co-owner, the attorney can allocate the entire seller-side tax proration to either of you (or split it) if you both consent in writing.

Process & Timing

1. Who files: No court filing. Where: Handled by the closing attorney and the county tax office. What: Proration shown on the settlement statement (e.g., ALTA); attorney uses county tax data and the contract. When: At closing; if the current bill has issued, it’s often paid from seller proceeds; if not, parties prorate and the buyer pays when billed.
2. The attorney verifies prior-year taxes. Any delinquencies are paid in full from seller proceeds to clear the lien. If current-year bills are available, the attorney may collect and pay them at or immediately after closing. Expect county-by-county practice differences.
3. Deed records at the Register of Deeds; taxes are either paid or prorated. Buyer later receives the current-year bill if unpaid at closing, reflecting the post-closing obligation.

Exceptions & Pitfalls

• Contract controls: The purchase contract may specify who pays the day of closing and whether there’s a post‑closing true‑up. Read it closely.
• Revaluation/Rate changes: Using last year’s rate is an estimate. If values or rates rise, the estimate may be off; consider a written post‑closing adjustment.
• Municipal taxes and special charges: City taxes and special assessments may be separate; confirm all are included in the proration.
• Deferrals/exclusions: Any tax deferral or exemption that ends on sale (for example, certain deferrals) can trigger additional amounts due; address this allocation in writing.
• Seller co-owners: Absent written instructions, the closing attorney may split the seller-side proration by ownership share. If you want one seller to cover taxes and the other to cover different costs, give the attorney a signed direction before closing.

Talk to a Real Estate Attorney

If you’re dealing with tax prorations and how to split them between a buyer and co-owners at closing, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at [919-341-7055].

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.