Property Tax Prorations
Proration is a process by which certain expenses in a real estate transaction are divided and allocated between the buyer and seller. Buyers and sellers generally agree that property taxes are a shared burden that must be prorated because tasxes generally cover a 12-month period intersected by the closing date, before which the seller occupied the property and after which the buyer will occupy the property.

Proration Theories
When a uyer and seller agree to prorate property taxes, there is no single accepted method for doing so. To better understand the tax proration methods that are used in Michigan, one must first comprehend the therorires for how governmental services are purchased. All theories presume that governmental services are purchased for a 12-month period, meaning that each property tax covers a 12-month period.

In Advance
First, taxes may be prorated as if they are paid in advance, meaning that a homeowner pays for govermental services to be provided in the future.

In Arrears
Second, taxes may be prorated as if they are paid in arrears, meaning that a homeowner pays for governmental services that have already been provided.

Concurrent
Third, taxes may be prorated as if they are paid concurrently, meaning that a homeowner pays for governmental services provided during the period of time within which property taxes become payable.

To see examples of the various tax proration methods, click here.