In a real estate transaction, who typically receives credit for any prepaid taxes at closing?

In a real estate transaction, the seller typically receives credit for any prepaid taxes at closing. This is grounded in the concept that when taxes are paid in advance and the property is sold, the seller is entitled to compensation for the portion of those taxes that covers the period after the sale. Essentially, since the seller has already settled these expenses up front, they may receive a credit on the closing statement to reflect the benefit that the buyer will enjoy from the prepaid taxes for the time they own the property following the transaction.

This process helps ensure that the financial responsibilities of taxes are fairly allocated, reflecting the actual time each party occupies the property during the tax period. Such credits are accurately calculated and applied to the closing costs to ensure that both parties are fairly treated in the transaction.

Understanding this helps clarify the importance of accounting for prepaid expenses like taxes when finalizing the financial aspects of a real estate deal.