Ever wonder why your Indiana property tax bill shows last year’s taxes, yet it changes what you pay at closing today? You are not alone. If you are buying or selling in Johnson County, understanding how taxes work can save you from surprises and help you read your closing statement with confidence. In this guide, you will learn how Indiana’s paid‑in‑arrears system drives tax prorations, credits, and escrow deposits, and what to ask your lender and title company so you know exactly what to expect. Let’s dive in.
Indiana taxes are paid in arrears
Indiana property taxes are paid in arrears, which means the taxes collected in a calendar year cover the previous tax year. If you pay a tax bill in 2024, that bill reflects the 2023 tax year. This is the core idea behind tax credits and prorations at closing.
Counties bill taxes in two installments each year, commonly in spring and fall. Exact Johnson County due dates appear on the county’s statements. Because bills you pay this year reflect last year’s assessment, most closings use the most recent billed taxes or a reasonable estimate to split costs between the seller and buyer.
Your assessed value and any exemptions drive the tax amount billed. Common exemptions include homestead, mortgage deduction, and senior or disability credits. Exemptions can change with ownership and occupancy, which means your bill after you move in could differ from the seller’s last bill.
Unpaid property taxes become a lien against the property. Title companies and lenders verify taxes and require that any unpaid amounts are handled at closing through payoff or escrow so you receive clear title.
Where taxes show on your closing statement
Tax proration between seller and buyer
A tax proration splits the last billed year’s tax amount based on how long each party owned the property during that tax year. In Johnson County, title companies typically use the most recent full-year bill to calculate this split. On your closing statement, look for language like “Seller credit for property taxes” or “Prorated real estate taxes to date.”
Because taxes are paid in arrears, the seller usually gives the buyer a credit for the seller’s share of the last billed taxes. The buyer then receives that credit to help cover the bill when it becomes due after closing.
When the seller pays at closing vs. buyer pays later
If the most recent prior-year taxes are due or unpaid, the title company will often pay them out of the seller’s proceeds or hold funds in escrow. After you close, you are responsible for future bills that reflect your ownership and any new exemptions you qualify for.
Escrow accounts set by your lender
Most lenders require a tax escrow to collect funds each month for future property tax payments. At closing, you will likely see an initial escrow deposit line item that funds upcoming payments plus a small cushion, depending on your lender’s calculation rules. This deposit is separate from the proration and is not a tax you are paying to the county at closing. It is a funding mechanism so your servicer can pay the bill when due.
Title company tax checks and certificates
Your title or settlement agent will pull official tax information from Johnson County to confirm the status of taxes and any special assessments. If anything is due, delinquent, or liened, it must be addressed at closing to protect the buyer and lender.
Special assessments on the bill
Some properties carry local charges, such as stormwater or improvement assessments. If they appear on the tax bill, they are usually handled like taxes. They may be prorated or paid from the seller’s proceeds depending on due dates and local practice.
Exemptions and the homestead deduction
If the seller had a homestead deduction that lowered their taxes, the proration still uses the actual last billed amount. If you move in and file for the homestead deduction, your future bills may be lower, but that change does not alter the proration calculated at your closing.
Common timing quirks
Because bills are paid a year behind, you might close before the bill for the time the seller owned the home is even issued. In that case, the title company uses the most recent bill or a reasonable estimate for proration. If the eventual bill differs, your purchase agreement may allow a post‑closing adjustment. Ask your closing agent how they handle these situations.
A simple proration example
Here is a simplified example to show how arrears impact your closing numbers. These figures are hypothetical and for illustration only.
- Closing date: June 15, 2024
- Most recent annual tax bill: $3,650 for tax year 2023 (payable in 2024)
- Daily proration using 365 days
Seller’s days of ownership counted for 2023 taxes: Jan 1 through June 15 = 166 days. The seller’s share is 166 divided by 365, multiplied by $3,650, which equals $1,661. At closing, the seller gives the buyer a credit for $1,661. The buyer’s remaining share is $1,989. When the next installment comes due, the buyer uses the seller credit plus their own funds to pay the bill.
Why this works: the bill due in 2024 represents 2023 taxes. The seller pays their portion of that prior-year liability for the time they owned the home during 2023. The buyer takes responsibility for the rest once they own the home, and the credit evens out the timing.
What to ask before you close
Use these questions to keep your closing on track and reduce surprises.
Ask your lender
- Will you require a tax escrow? If yes, how much is the initial escrow deposit and how did you calculate it?
- Will any tax installments be collected and paid at closing?
- How much will my monthly escrow for taxes be based on the current estimate?
- How do you handle escrow shortages or changes if the tax bill increases or decreases later?
Ask your title or closing agent
- What tax year and exact bill amount will you use for proration?
- Will unpaid taxes or special assessments be paid from the seller’s proceeds or held in escrow?
- Will you obtain an official tax statement from Johnson County, and can I review it before closing?
- How do you handle post‑closing adjustments if the actual bill differs from the estimate?
- Are there any recorded tax liens, special assessments, or reassessments on this parcel?
Ask the seller or verify with county records
- What is the most recent property tax bill amount? Can I see the bill?
- Which exemptions are currently applied to the property, such as homestead or mortgage deduction?
- Are there any pending reassessments, appeals, or exemption changes that could affect the next bill?
Ask Johnson County offices
- What are this year’s tax bill issue and due dates for each installment?
- Are there any local special assessments attached to this property?
- How and when can I apply for the homestead deduction, and when would it affect my bill?
Final checks for your closing statement
- Confirm the tax year used for proration, such as using the 2023 bill at a 2024 closing.
- Confirm whether the calculation used daily or monthly proration and which day count was used.
- Verify that the initial lender escrow deposit is separate from the tax proration credit.
- Confirm who is paying any unpaid prior bills and how the payoff appears on the statement.
How the escrow deposit fits into your cash to close
Your cash to close may include an initial tax escrow deposit collected by your lender, even though no tax is being paid to the county that day. Think of escrow like a savings envelope your lender manages to ensure the county is paid on time. The number of months collected depends on when your first tax installment comes due and the servicer’s cushion requirements. This is why two buyers with the same annual taxes can have different initial deposits based on their closing dates and payment schedules.
If you plan to claim the homestead deduction after you move in, tell your lender. Your escrow analysis might change in the future if your annual tax amount drops once exemptions are updated.
Special situations to flag early
- Closing right before a due date. Your title company may require payment of an upcoming installment or hold a temporary escrow to ensure the county gets funds on time.
- Unpaid prior-year taxes. Any delinquent taxes are liens that the title company will require to be paid at or before closing. Expect a payoff or a holdback.
- Changing exemptions. If the seller’s exemptions will not carry over, your future tax bill could be higher or lower than the last bill. This affects your ongoing escrow, not the proration already calculated at closing.
Johnson County resources to contact
For the most current bill amounts, installment due dates, exemptions, and payoff procedures, contact:
- Johnson County Assessor for assessed value, exemptions, and appeals
- Johnson County Treasurer for payment history, outstanding installments, and due dates
- Johnson County Auditor or Recorder for official tax statements and recorded tax liens
- Indiana Department of Local Government Finance for statewide property tax guidance on paid‑in‑arrears and assessments
- Your mortgage lender and local title or settlement agent for escrow requirements, tax certificates, and the exact settlement figures
If you are not sure which office to call first, ask your title company to provide the current tax certificate and walk you through each line.
Ready to make sense of your numbers before you sign? I am happy to review your draft closing statement and help you confirm the tax proration, credits, and escrow. Reach out to Angi Oakes to get started.
FAQs
What does “paid in arrears” mean for Indiana property taxes?
- It means the tax bill you pay this year covers last year’s taxes, which is why closings use the most recent billed amount to prorate costs between seller and buyer.
How do tax prorations differ from lender escrows at closing?
- A proration is a credit or debit between buyer and seller for last year’s taxes, while an escrow is money your lender collects now to pay future tax bills when they are due.
Will I get a tax bill right after I buy a home in Johnson County?
- You may receive the next scheduled installment after closing, but you should also receive a seller credit at closing that offsets the portion tied to the seller’s time of ownership.
What happens if the seller has unpaid taxes on the property?
- The title company typically requires those taxes to be paid from the seller’s proceeds or held in escrow so you receive clear title at closing.
If I file for the homestead deduction, will it change my closing proration?
- No, your proration is based on the last billed amount at closing; any homestead deduction you claim later affects future bills and your escrow analysis, not the settled proration.
What if the actual tax bill later is different from the estimate used at closing?
- Check your purchase agreement and ask your closing agent, because some contracts allow post‑closing adjustments if the final bill varies materially from the estimate.
