If the seller of a home paid property taxes in advance for the year and closing takes place on October 1, what would be entered on the settlement document?

When a seller pays property taxes in advance for the year and the closing occurs on October 1, the settlement document needs to reflect the fact that the property taxes cover a period beyond the closing date. Since the seller has already paid taxes for the entire year, this payment benefits the buyer for the remainder of the year after closing.

In this situation, the seller is entitled to a credit for the portion of the property taxes that covers the time they will no longer own the home. Therefore, the seller receives a credit for the portion of the taxes already paid, and the buyer incurs a corresponding debit since they will be responsible for the property taxes for that remainder of the year.

This balances the financial responsibility during the closing process, equitably distributing the tax burden, which is why the entry would show a credit to the seller and a debit to the buyer. By doing this, the settlement statement accurately represents the financial transactions and obligations between the parties involved in the sale.