Calculating real estate taxes when you sell a home in the Iowa City area is a pretty complicated process. When you’re in the planning phase of selling your home the best plan is to calculate paying one year’s real estate taxes at closing. This will give you a number close to what you will pay. Depending on the month you close on the home it could be a little more or a little less. Real estate taxes in Johnson County are paid a year in arrears so calculating one year’s taxes is a safe estimate.
Of course it would be a cop out to stop this post there. I do know how to calculate how much real estate taxes will be at closing and have prepared an example below with a closing date of October 31. (The date of closing will always have an impact on what you pay as you will pay taxes up to the date of closing).
Calculation of Iowa City Real Estate Taxes for a Closing on October 31st
At the end of July or beginning of August tax statements are sent out to residents in the Iowa City area. The first half of the real estate tax payment is due on September 1st and the second half on March 1st. Since real estate taxes are paid a year in arrears in Iowa, that covers real estate tax payments from July 1st to June 30th the following year. (That’s the first confusing part, the tax year is not the same as a calendar year)
For a house closing October 31st, the seller’s escrow company will have paid the first half of the payment in September. The second half of the yearly payment, (January through June), will need to be paid at closing PLUS a prorated amount for taxes due after June 30th and up to the day of closing.
For sellers that translates into a tax payment at closing of 10 months worth of taxes. Keep in mind that typically your lender will have funds in escrow to cover this tax payment. That however won’t be of any help at closing since the escrow funds aren’t reimbursed to you until a few weeks after closing. (**To make sure that happens, be sure your lender knows your new address – I’m sure there are escrow funds in bank accounts all over the US from sellers who didn’t!)
October is a good month to close as it falls after the real estate tax payment made to County in September. As you can imagine, a closing in August would look a lot different with that payment not made yet.
Are you getting ready to sell your home the Iowa City area? Cardinal Realty is based in Coralville Iowa and our primary area of expertise is helping clients buy and sell homes in Iowa City, Coralville and North Liberty IA. When you’re ready to get your home sold, sound advice and guidance are a call, text or email away. Call 319-400-0268 or drop me an email. I promise you it will be worth your while!
Disclaimer: This post is a bit on the technical side and I feel the need to point out that you shouldn’t make any financial decisions based on the information provided. Trust and Verify as the saying goes. It’s safer!