In Montgomery County, property tax proration at closing splits the tax year between buyer and seller by days of ownership. Because Maryland taxes are paid in advance for the July 1–June 30 fiscal year, the buyer usually credits the seller when the current bill is already paid, or the seller credits the buyer when it isn't. On a Bethesda home with about $11,000 in annual taxes — roughly $30 a day — the credit can run into the thousands, so confirm the figure on your settlement statement before closing.
Quick Answer
In Montgomery County, property tax proration at closing splits the tax year between buyer and seller by days of ownership. Because Maryland taxes are paid in advance for the July 1–June 30 fiscal year, the buyer usually credits the seller when the current bill is already paid, or the seller credits the buyer when it isn't. On a Bethesda home with about $11,000 in annual taxes — roughly $30 a day — the credit can run into the thousands, so confirm the figure on your settlement statement before closing.
When you buy or sell a home in Montgomery County, the property tax bill almost never lines up neatly with your closing date. So at settlement, the taxes get split between buyer and seller based on how many days each of you actually owns the home during the tax year. That split is called proration, and it shows up as a line item on your settlement statement that can move a few thousand dollars in either direction.
Here's the part that surprises people: in Maryland, property taxes are paid in advance, not in arrears. That single fact changes who ends up crediting whom at the closing table. If you understand it going in, the number on your settlement sheet will make sense instead of feeling like a surprise.
How property tax proration at closing works in Montgomery County
Maryland runs on a fiscal tax year that starts July 1 and ends June 30. The county mails the annual tax bill in July, and it covers that full July-to-June window. Because the bill is for the year ahead, whoever pays it is effectively pre-paying taxes for months they may not still own the home.
Montgomery County bills most owner-occupied homes on a semi-annual schedule by default. The first installment is due by September 30 and the second by December 31. Homeowners can elect to pay the full year at once, but the semi-annual structure is what most Bethesda and Potomac homeowners see.
At settlement, the title or settlement company calculates each party's share. The math is straightforward:
- Take the annual property tax amount for the home.
- Divide by 365 to get the daily tax cost.
- Multiply by the number of days each party owns the home during the tax year.
The seller is responsible for taxes up through the closing date. The buyer is responsible from the closing date forward. Property tax proration at closing simply reconciles those two shares against whatever has already been paid to the county.
Who credits whom — and why the calendar matters
Because Maryland taxes are paid in advance, the direction of the credit depends entirely on when you close relative to when the bill was paid.
If the seller already paid the bill covering the period past closing, the buyer owes the seller for the days after settlement. The seller pre-paid taxes for time the buyer will own the home, so the buyer reimburses that portion. This is common for closings in the winter and spring, after the fall installments are paid.
If the seller hasn't paid the bill yet, the seller credits the buyer for the days before settlement. Now the buyer will pay the full county bill when it comes due, so the seller hands over their share up front. This is common for summer closings, right after a new fiscal year begins but before the September and December due dates hit.
A quick example grounds it. Say a Bethesda home carries roughly $11,000 in annual property taxes — a reasonable figure for a home assessed around $1.1 million. That's about $30 a day. Close on a home where the seller already paid the full year, with about 120 days left in the tax year, and the buyer would credit the seller roughly $3,600 at the table. Flip the timing so the bill is still unpaid, and the money flows the other way.
If you're selling, this proration line matters to your bottom line as much as it does to a buyer's. A credit you receive for prepaid taxes adds to your net proceeds; a credit you owe the buyer comes out of them. It's rarely a make-or-break figure, but on a higher-priced Bethesda or Potomac home the tax bill is large enough that the proration can swing a few thousand dollars — money worth accounting for before you agree on a closing date. Sellers who plan their timing around it, rather than discovering it at the table, tend to feel a lot better about the final number.
Montgomery County settlements traditionally use what's called "short" proration, meaning the next tax bill due after closing is the one that gets divided. Your settlement agent handles this calculation, but you should still know the logic so the credit doesn't catch you off guard. If you want the full picture of what else lands on that settlement sheet, our guide to closing costs for buyers in Bethesda walks through every line, and what to expect at closing in Maryland covers the day itself.
What can throw the proration number off
Most prorations are clean. A few Montgomery County situations complicate them, and these are worth flagging before you sign.
The Homestead Tax Credit cap doesn't transfer. Maryland's Homestead Tax Credit limits how much a primary residence's taxable assessment can rise each year. A long-time owner may have a taxable value well below the property's actual assessed value. When you buy, that cap resets — so the taxes you're prorating at closing may be lower than what you'll actually owe next year once the assessment catches up. Budget for that jump. Our post on the Maryland Homestead Tax Credit explains how to re-apply as the new owner.
New construction triggers supplemental bills. If you're buying a newly built home in North Bethesda or a Bethesda teardown-rebuild, the county may not have assessed the finished house yet at closing. The initial proration is based on the land or partial value, and a supplemental tax bill arrives later once the full improvement is on the rolls. That later bill is not fully captured in the closing proration.
Reassessment and appeals. Montgomery County reassesses property in three-year cycles. If a reassessment or an assessment appeal is pending, the tax figure used at closing is an estimate, and the settlement company may adjust it once the final number is known.
None of these are reasons to worry — they're reasons to ask questions. A good agent and settlement team will flag them before you're sitting at the table wondering why the number looks off. For the bigger picture on how the county taxes homes, what Bethesda homebuyers don't know about Montgomery County property taxes is a useful companion read.
What to check on your settlement statement
When your Closing Disclosure or settlement statement comes through, find the property tax line and confirm three things:
- The annual tax amount used matches the county's current bill for the property, not an outdated figure.
- The proration dates reflect your actual closing date and the correct fiscal year.
- The direction of the credit makes sense given whether the current bill has been paid.
If any of those look wrong, raise it before closing, not after. Adjustments are far easier to make on the front end. Every transaction is a little different, and the only way to know your exact number is to run it against the specific property, the closing date, and what's already been paid to the county.
If you're working through a purchase or sale in Bethesda, Potomac, or anywhere in Montgomery County and want to understand exactly how property tax proration at closing will affect your bottom line, I'm happy to walk you through the numbers before you get to the settlement table. Reach out anytime.
About Pey Behin
Pey Behin is a residential real estate agent serving the Washington, DC metro area, with a focus on Bethesda, Montgomery County, and Northern Virginia. He works with buyers and sellers who want clear strategy, data-driven pricing, and direct guidance throughout the transaction process.