Why are Illinois real estate closings typically structured so that the seller credits the buyer for a portion of the current year's property taxes, even though the tax bill for that year has not yet been issued?
Correct Answer
C) Illinois property taxes are levied in one year but not billed and payable until the following year, so the seller credits the buyer for the portion of the current year's taxes that accrued during the seller's ownership
Illinois follows an arrears-based property tax cycle: taxes are levied based on the assessed value established in a given calendar year but are not billed or due until the following year, typically in two installments. For example, taxes based on 2025 assessments are billed and payable in 2026. At a closing that occurs during 2026, the 2025 tax bill may already be known and payable, but the 2026 taxes — which are accruing during the seller's current ownership — will not be billed until 2027. Because the seller owned the property during part of 2026, the seller owes the buyer a credit for that accrued but not-yet-billed liability. This arrears structure is the reason tax prorations are a standard and essential part of every Illinois residential closing.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Adverse possession is a legal doctrine that allows a person to claim ownership of land by occupying it continuously for a statutory period under specific conditions, without the true owner's permission.
A bargain and sale deed implies that the grantor holds title and possession of the property but does not include warranties against encumbrances or title defects.
The chain of title is the sequential history of all transfers of ownership for a specific property, from the original source (typically a government patent or grant) to the present owner. An unbroken chain is essential for marketable title.
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