Understanding Property Taxes in Ohio

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Property Taxes OhioPaying your Ohio property taxes at closing is one of the most confusing costs for sellers.

The State of Ohio handles property tax payments in a unique (and sometimes confusing way).  Our property taxes are paid in arrears.  So the most recent tax bill you recently received in June or July (each county is different) covers property taxes owed from July 1, 2018, through December 31, 2018.

The majority of homeowners rarely see a tax bill because your lender is holding money in an escrow fund as part of your monthly mortgage payments.  Each time the 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 the closing time comes when you go to close on the home you sold.

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 July 22nd 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 you haven’t paid the property taxes for 2019 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, 2018- December 31, 2018) and a $1,117 property tax payment shows up in the Closing Disclosure.  You owe property taxes from January 1, 2019, through July 21, 2019.  $1,000 for January -June and 21 days of prorated taxes of $117 (covers taxes until closing on 7/22).

So 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.