I’m digging deep into back when I learned this for the test but here goes. How does one calculate the tax proration shown on a settlement statement?
First step is to look up the property on the property appraisers web site. Note the total ad valorem and non ad valorem charges for this year AND last.
Ad valorem (taxed by value) taxes IN FLORIDA are collected in arrears and are based upon the calendar year. The tax bill we get in November of say 2025 is for ad valorem taxes from 01/01/2025 – 12/31/2025.
Step 1 – For the Far Bar As-Is it states that: “In all cases, due allowance shall be made for the maximum allowable discounts and applicable homestead and other exemptions.” Thus, take the non ad valorem amount and deduct 4% for the taxes being paid in November. 10,000 becomes 9,600. Now divide 9600 by 365, so $26.30 per day. For the next step you need to count the calendar days from 1 Jan to the day BEFORE Closing. If the Closing date is say 09/03/2025 then 31+30+31+30+31+30+31+31+2 = 247. The non ad valorem portion of the tax proration is (9600/365)*247=6,496.44. This is the easy number. The Seller owes the Buyer this amount for the ad valorem taxes.
Step 2 – Calculating the non ad valorem portion of the pro ration is a bit more complex but NBD. Non ad valorem charges are TYPICALLY, but not always, paid in advance and are based upon the fiscal year of the authority placing that charge of the tax bill. Most (MOST) municipalities, and folks like the local water improvement district, collect these charges IN ADVANCE and based upon a fiscal year of 10/01-09/30. So lets say the non ad valorem charges are $500 and ALL from say West Palm Beach, which collects these in advance based upon the 10/01-09/30 fiscal year. The tax bill mailed in November of say 2025 is for non ad valorem services from 10/01/2024-09/30/2025. Thus, the proper way to calculate this prorations for our 3 September 2025 Closing is to use the non ad valorem charge from the 2024 tax bill and calcualate what the Buyer owes the Seller (Note here that for a closing after 1 October the Seller would owe the Buyer for this time and it would be based upon the 2025 tax bill) for the remainder of September being (30-2) 28 days. The 4% discount for early payment applies to this as well. So, ($500*0.96/365)*28 = $36.82. The Buyer owes the Seller this amount, for this example date, for the non ad valorem portion of the tax bill.
So, for this example it’s 6,496.44-$36.82 = 6,459.62 shown as a charge to Seller and a credit to the Buyer. Thus, the Buyer will have these funds in November when they get the tax bill to pay.
