2014 Tax Proration
Posted by Laramie Driscoll
In most cases we already know that property tax valuations are higher in 2014 than 2013, many title companies are prorating the portion of 2014 taxes that Sellers credit Buyers at closing based on the amount of property taxes paid in 2013.
For properties that have a 2014 homestead exemption, the capped increase for tax valuation purposes is 10%. If the homestead exemption was lost for 2014 (or there was not one to lose), there is no cap on the taxable value increase.
On every transaction with a tax increase this year, when the Buyers, their Realtor or their mortgage broker have requested that taxes be based on an estimate of 2014 taxes, the Sellers have agreed to do this.
How much does that save a buyer?
Let's assume a $350,000 home in an area with a 2.6% tax rate, and a 10% homestead cap. For example, this home had a $300,000 valuation in 2013 and a $340,000 valuation in 2014, which would make the max taxable value $330,000 in 2014.
The estimated additional taxes in 2014 will be the capped $30,000 increase x 2.6% = $780 = $455.
If the buyer closes at the end of August, the proration difference is 8/12 x $780 = $520. If the buyer closes at the end of September, the proration difference is 9/12 x $780 = $585.
Section 13 of the Texas Real Estate Commission (TREC) promulgated contract updated in April 2014, stipulates that the Buyers and Sellers will adjust the proration after closing.
However, we all know from experience that Buyers and Sellers rarely recalculate proration after closing.
Categories:
Home Buying
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Disclaimer: The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the HRIS.
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