At an Illinois closing, the seller is credited and the buyer is debited for a share of property taxes covering months already elapsed in the current year, even though no tax bill for that period has yet been paid. Which characteristic of Illinois property taxation best explains this proration practice?
Correct Answer
A) Illinois property taxes are levied and collected in arrears, meaning the bill paid in the current year covers the prior year's taxes, so the seller owes the buyer for the portion of the current year during which the seller owned the property.
Illinois property taxes are paid in arrears: the bill due and payable in 2025, for example, covers the 2024 tax year. Because the bill for the current ownership year has not yet been issued or paid at the time of closing, the seller has accrued a tax obligation for every month they owned the property in that tax year but has not yet paid it. To account for this, the seller is credited (and the buyer is debited) at closing for the seller's proportionate share of the anticipated tax bill. This ensures the seller bears the cost of taxes attributable to their ownership period even though the actual bill will be paid later by the buyer.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A deed is a written legal document that conveys (transfers) ownership of real property from one party to another. It must be delivered to and accepted by the grantee to be effective.
For a deed to be valid, it must contain several essential elements including a competent grantor, identifiable grantee, consideration, legal description, granting clause, signature of the grantor, and delivery and acceptance.
Escrow is an arrangement in which a neutral third party holds documents, funds, or other items on behalf of the buyer and seller until all conditions of the transaction are met.
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