When venturing into the world of real estate, understanding the intricacies of property taxes is crucial. The responsibility for property taxes undergoes adjustments during a property transaction, a process known as the property tax adjustment. In this blog, we unravel the complexities surrounding property tax responsibilities when buying a home.
In the City of Edmonton and many other Alberta municipalities, property taxes become due on June 30 each year. Whether payable in June, August, or September, these payments cover the calendar year. During a property sale, a crucial aspect is the property tax adjustment. If the seller has paid their taxes in full, the buyer owes the seller their share. Conversely, if unpaid, the buyer receives a credit for the seller’s share, calculated to the precise closing date.
With the increasing trend of monthly tax payments, meticulous calculations ensure the accurate crediting of payments up to the closing date. The process involves comparing the actual payments made by the seller with the calculated amount owed up to the closing date. This difference, ranging from under $10 to $200, is credited accordingly.
Upon completing the sale, the seller’s monthly payments cease, requiring the buyer to make their own arrangements. The buyer’s initiation of monthly payments to the municipality can only occur after obtaining property ownership. Failure to arrange prompt payments might lead to a bill for the full amount, payable within 30 days to avoid penalties.
Buyers, burdened with various responsibilities during a property purchase, are urged to bring sufficient funds to cover remaining property taxes for purchases closing after June 30. This ensures the payment of taxes in full until December 31. Subsequently, buyers can enroll in monthly property tax payments, starting in January of the following year.
Certain mortgage lenders may insist on including property taxes in monthly mortgage payments, leading to potential confusion. Clarifying the process, payments collected by the lender from July to December contribute to the next year’s property taxes. Buyers must cover the current year’s taxes at closing to avoid any shortfall in the tax account.
The blog incorporates essential information for 2023, emphasizing the impact of ownership changes on property tax bills. Despite processing delays, property owners are reminded that non-receipt of a tax bill does not exempt them from late payment penalties. The due date, payment options, and supplementary tax bills for new constructions are outlined for clarity.
Understanding property tax responsibilities during a home purchase. Buyers and sellers alike must be aware of the intricate details of property tax adjustments, ensuring a smooth transition of ownership. For further queries or discrepancies, buyers are advised to review their statement of adjustments and consult their lawyers.