I am frequently asked if the settlement agent collects property taxes at closing to pay directly to the tax collector. Typically, the settlement agent does not collect property taxes unless they are currently due. In Mississippi property taxes are due when billed but delinquent after February 1 of the following tax year. If your closing occurs between November and February 1 and taxes have not been paid, then the settlement agent will usually collect property taxes and pay them directly to the tax collector. They will also collect any delinquent taxes and penalties and pay those to the tax collector.

However, in most closings the seller gives the buyer a credit for the share of unpaid taxes from January 1 through the closing date, which is called proration. In Mississippi property taxes, and where applicable city or municipal taxes, are paid in arrears. Therefore, taxes are typically estimated using the tax bill from the prior year. Every closing is different; however, this is how property taxes are normally handled.

It is also important to note that homestead tax rates are determined by the status of the property as of January 1 of the tax year. The name of the person or entity who owned the property as of January 1 will typically also be listed as the owner on the tax bill.

Gretchen Gentry
Attorney
RANDALL | SEGREST