Why we don't count accrued property taxes in the list of clo
USINFO | 2013-11-29 15:25
If you're wondering why we don't list accrued property taxes in the calculator, then here's the explanation. 

Since you're probably not buying your house in January, at closing you pay the taxes that have accrued since the beginning of the year.  For example, if you buy your house in May, you'll owe taxes from January through May.  You might think it's not fair that you owe taxes for a period when you didn't own the house, and you're right.  So at the closing, the seller will pay you those accrued taxes.  So it's a wash: you owe some accrued taxes, but the seller pays you those accrued taxes.
 
To be precise, you don't actually owe any taxes at the closing; taxes are generally paid in January for the previous year.  But most buyers take advantage of the bank's free escrow service, in which your monthly payment includes a little bit extra for taxes and insurance.  The bank collects that from you with each payment, and then once a year they pay your taxes and insurance for you.  So at closing, the accrued taxes you pay (that were paid to by the seller, remember) go to the bank, which holds them for you until your tax bill is actually due, at which point they pay it.
 
Accrued property taxes are shown on lines 210-213 and 510-513 of the Settlement Statement.
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