Under Illinois law and closing practice, which of the following best explains why a seller is typically credited for property taxes at closing even though the current tax bill has not yet been paid?
Correct Answer
D) Illinois property taxes are levied and paid in arrears, meaning the bill paid in the current year covers the prior year, so the seller owes a credit for the portion of the prior period they owned the property.
Illinois operates on an arrears system: the tax bill paid in, for example, 2025 covers the 2024 tax year. Because the seller owned the property during some or all of the period covered by an unpaid bill, the seller credits the buyer at closing for that accrued but not-yet-billed liability. The buyer then pays the full bill when it comes due, reimbursed in part by the credit received. This arrears structure is the foundational reason tax prorations are a standard feature of Illinois closings.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
The closing process, also called settlement, is the final step in a real estate transaction where documents are signed, funds are disbursed, and title is officially transferred from the seller to the buyer.
Constructive notice is the legal presumption that a person has knowledge of information that is available through public records or visible inspection of the property, regardless of whether they actually knew about it.
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