Dayton Real Estate Long and Short Tax Proration; Which is Better?

Which is better?  Long or Short Real Estate Tax Proration?

If you are a home seller, Short proration is better.  If you are a buyer, Long proration is better. Custom for your area depends on the county. There are 88 counties in OH and most all use  Long tax proration except  Montgomery, Miami and Lucas counties. Greene and Warren counties sometimes see short but are predominately long proration. That said, tax proration is always negotiable in a real estate transaction but going against tradition can cause friction from the start.  

Long Tax Proration 

Taxes in Ohio are a full year in arrears.  So, the tax bill you get in July is for the SECOND half of the PRIOR year.  Intuitively, you would think that the July bill was for the 1st half of the current year since you just finished that time period in this example.  But that is incorrect and part of what confuses people so much.  Our Dayton real estate contracts default to Long proration which says the seller’s share is based upon the taxes and assessments which are a lien for the year of closing.  Seller pays the entire tax due which covers the tax period(s) to the date of closing.  

Short Tax Proration

The Short method says the seller pays a prorated share calculated from the first day of the CURRENT tax period to the day of closing. Some quick math shows the short method is less expensive for the seller since it only prorates the CURRENT tax period.  Whereas the Long method prorates for an entire year taking into account the CURRENT and PRIOR tax period. 

Tax Bills After Closing

To further complicate things, many buyers don’t fully understand or remember the Long vs Short conversation while drafting the sale contract. After closing, they get a second half tax bill in July (or first half in Feb) for a time they didn’t own the home.  But that’s ok and correct. Remember, the taxes are in arrears like they have always been and the seller credited you at closing based upon the proration agreed upon.   

Regardless of which proration you use, just remember, you only pay taxes for the days that you own the home. You do not need to worry that you are paying too much in taxes. It does not matter what tax period they are for - the in arrears part confuses. If you own the home for 2 years and 3 months then you pay taxes for 2 years and 3 months. It does not matter which tax period your payments are for, when you sell you are done with taxes.

Feel free to reach out with any real estate related questions you have!