Who pays the property tax when a Sacramento house sells mid-year

The county never splits a property tax bill between a buyer and a seller. Escrow does that on paper, using the closing date. A few months later the county sends the buyer a supplemental bill that the escrow never saw. Here is how both pieces work, with numbers.

At my old counter, the calls about prorations came in two waves. Sellers called right after closing, asking for a refund. Buyers called about six months later, holding a supplemental bill and asking why they were being taxed twice.

The tax year runs July to June

California property taxes cover a fiscal year from July 1 to June 30. The bill is based on the value on Jan. 1, the lien date, and it is paid in two halves: the first due Nov. 1 and late after Dec. 10, the second due Feb. 1 and late after April 10. The Department of Real Estate's reference chapter on taxation walks through the same calendar.

The annual bill is issued on the property, and the county has no power to divide it between owners. The Board of Equalization said so in a 1988 legal letter that is still in its annotations: outside of supplemental assessments, proration "is typically a matter of contract between the buyer and seller." The split happens in your purchase contract and your escrow instructions, nowhere else.

How escrow divides the bill

The Department of Real Estate's escrow guide for consumers describes a proration as dividing a recurring cost so each side pays for its own time as owner, figured from the closing date and a "paid to" date. California purchase contracts typically require property taxes, including supplemental taxes, to be paid current as of closing, and the buyer takes over from there.

On the settlement statement, taxes show up in one of two places. The CFPB's Closing Disclosure explainer calls them "adjustments for items paid by seller in advance," which the buyer reimburses, and "adjustments for items unpaid by seller," which the seller credits to the buyer because the buyer will pay them later.

Here is what the seller's share looks like for one bill at different closing dates.

Take the March 15 closing. The seller owned the house for 257 of the year's 365 days, so the seller's share is $4,800 times 257 divided by 365, or $3,379.73. The buyer's share is the other 108 days, $1,420.27.

Now look at what has been paid. The seller paid the first $2,400 in December. The second $2,400 was due Feb. 1 and is still open, since it isn't late until April 12. Because the contract says taxes are paid current at closing, escrow pays that $2,400 out of the seller's proceeds. The seller has now paid the whole $4,800, so the buyer credits the seller $1,420.27 for the buyer's 108 days. The seller ends up out exactly $3,379.73.

Who pays what

Defaulted taxes come off the seller's side

A defaulted tax from an earlier year is a lien on the house. The Department of Real Estate's escrow chapter notes that liens the buyer isn't taking over may be paid off during escrow, and defaulted taxes are handled that way. Escrow asks the Tax Collector for the redemption amount and pays it from the seller's money.

The redemption amount changes as each month's 1.5 percent penalty attaches, so an escrow officer asks for a figure good through a specific date. If closing slips into the next month, the figure has to be pulled again. I took a lot of those calls. If you are a seller in this spot, get the figure yourself early, because it often decides how much cash you walk away with. My article on the default timeline shows how fast it grows.

The supplemental bill buyers should expect

A sale is a change in ownership, and the Assessor reappraises the house as of the closing date. The difference between the new value and the old one is billed on a supplemental bill, separate from the annual bill. The Assessor's guide to supplemental assessments gives the formula: the net change in value, times the tax rate, times a factor for the whole months left in the fiscal year after the month of the sale.

A few things make these bills a surprise:

• A closing between Jan. 1 and May 31 produces two supplemental bills. One covers the rest of the current year and the other covers the next full year, because that year's roll was set on Jan. 1 at the seller's value.
• The bill goes to the owner, not the mortgage company. The county's supplemental tax page tells owners with impound accounts to ask their lender about it.
• It can take a while. The county says reassessment usually takes six to nine months, and the Assessor says some take up to two years.

Here is an example. A buyer pays $500,000 on March 15, 2027 for a house the seller had on the roll at $220,000. The net change is $280,000. At an illustrative 1.1 percent rate, the first bill covers April, May and June, a factor of 0.25: $280,000 times 1.1 percent times 0.25 is $770. The second bill covers all of 2027-28 at a factor of 1.00, which comes to about $3,080 before the small inflation step on both values.

Refunds, and why the seller rarely gets one

Sellers often expect a check from the county for the months after closing. For the annual bill, none comes; the proration in escrow was the refund. When a buyer pays less than the seller's assessed value, the supplemental assessment is negative and the county does issue a refund, but the Department of Real Estate's taxation chapter says it goes to the new owner, not the original taxpayer. The county also won't release a negative supplemental refund until the annual bill is paid in full.

There is one case where a seller deals with the county after closing. If the seller bought or built recently and their own supplemental bill hadn't been issued before the resale, the county splits it between seller and buyer by days of ownership. If it was already issued, it stays the seller's bill, and any sharing is between the two of them.

The homeowners' exemption also changes hands. The seller's exemption ends when the deed records, for the coming fiscal year. The buyer has to file a new claim, within 30 days of the supplemental notice, to get the $7,000 reduction on the homeowners' exemption, worth about $70 to $80 a year.

A short list for sellers

1. Look up the parcel online before you list and see which installments are paid.
2. If anything is late or defaulted, get the payoff figure and its good-through date.
3. Read the proration lines on the estimated settlement statement against the dates above.
4. If you sold for less than your assessed value, expect no supplemental refund yourself.

If you are comparing ways to sell, the tax lines are a small part of what you net. A cash buyer's number is built differently from a listing's, and Lorris Home Buyers explains how the offer math works on its own site. Their overview of options for selling a house quickly is another place to start. Either way, the same proration rules apply at closing.

If you remember one date from this page, make it Jan. 1. A house bought in the first five months of the year will bring the new owner two supplemental bills, and neither one shows up in escrow.