Understanding 2017 Ohio Property Taxes

Understanding 2017 Ohio Property Taxes

2017 Property Taxes OhioUnderstanding 2017 Ohio property taxes at closing is still one of the most confusing costs for sellers.

The State of Ohio handles property tax payments in a unique (and sometimes confusing way).  Property taxes are paid in arrears.  So the most recent tax bill you received in June or July (each county is different) covered property taxes owed from July 1, 2016, through December 31, 2016.

Most home owners rarely see a tax bill because the lender is holding your payment in an escrow fund as part of your monthly mortgage payments.  It’s important to remember that each time your Ohio property tax bill is paid, the lender or mortgage servicing company figures out if your current payments are adequate to pay the next bill.  If not your monthly payment is adjusted.

Confusion at closing time comes when you get to the closing and discover you owe more property taxes than expected.

The first issue is timing.  You or your lender has paid the current tax bill right around the closing date but the county records don’t reflect any payments. The title company will work with you and do some research and try to resolve the payment status prior to closing.  Most county offices are great about tracking down payments

The second issue pops up because we pay our taxes in arrears.  You are scheduled to close on August 29th and the latest tax bill has been paid. However the closing documentation states you owe property taxes- deducting the amount from the seller and showing as it credit for the buyer.

Remember that you haven’t paid your property taxes for 2017 yet.  And since your share of this year’s taxes will be sent to the new owner -the amount you owe is prorated and transferred at closing.

Let’s assume your property taxes are $2,000 a year ($1,000 every 6 months).  Your last tax bill has been paid (for July 1, 2016- December 31, 2016) and a $1,117 property tax payment shows up in the Closing Disclosure.  You owe property taxes from January 1, 2017, through August 29, 2017.  $1,000 for January -July and 29 days of prorated August taxes of $156 (covers taxes until closing on 8/29).

In the end,  when you walk out of the closing future Ohio property tax bills for that property belong to the new owner.

As long as sellers remember that Ohio property taxes are paid in arrears the extra tax expenses at closing should come as surprise.