Property taxes run by calendar year. Closings do not. The property tax adjustment reconciles the two, so each party pays only for the days they actually owned the home.
It appears on the statement of adjustments, the one-page summary your lawyer prepares showing what the buyer owes on closing beyond the purchase price.
The rule in one line
The seller pays for every day up to and including the day before closing. The buyer pays from the closing date onward.
Everything else is arithmetic on top of that.
Which way the money moves
| Situation | Who owes whom |
|---|---|
| Seller has paid taxes past the closing date | Buyer credits the seller the overpaid portion |
| Taxes for the period before closing are still unpaid | Seller credits the buyer |
| Taxes paid exactly to the closing date | No adjustment |
In Ontario most closings produce a credit to the seller, because municipalities bill interim taxes in the first part of the year and sellers have usually paid ahead of where the calendar sits.
Worked example
A Toronto home closes on August 15. The annual property tax is $6,570. The seller has paid the full year.
Daily rate: $6,570 ÷ 365 = $18.00 per day
Days from August 15 to December 31, inclusive: 139 days
Buyer’s share: 139 × $18.00 = $2,502
The seller prepaid that period, so the buyer credits the seller $2,502 on the statement of adjustments. The buyer brings that amount to closing on top of the balance of the purchase price.
Reverse the facts – the seller has paid nothing for the year – and the seller credits the buyer for January 1 to August 14 instead.
What your lawyer actually does
Orders a tax certificate from the municipality. This is the authoritative record of what has been billed, what has been paid, and whether arrears exist. Nobody adjusts from the seller’s recollection or a screenshot of the tax portal.
Checks for arrears. Unpaid property tax is a lien with priority over almost everything, including the mortgage. Arrears are paid out of the seller’s proceeds on closing – they never transfer to the buyer.
Handles the mortgage tax account. Where the seller’s lender collected taxes with the mortgage payment, the balance sitting in that account is dealt with between the seller and their lender, not on the statement of adjustments.
Notifies the municipality of the ownership change so future bills go to the right person. Buyers should still confirm this themselves in the first few months – a missed bill accrues penalties whether or not anyone told you.
New builds and pre-construction
This is where adjustments go wrong.
On a new home, the municipality has not yet assessed the completed building, so the builder charges an estimated amount at closing based on land value alone. Months or years later MPAC issues a supplementary assessment covering the period from occupancy, and the buyer receives a bill for the difference – sometimes several thousand dollars, long after everyone has moved on.
That bill is normally the buyer’s responsibility. Budget for it. It is not an error and it is rarely negotiable.
Builder statements of adjustments also carry items a resale never has: development levies, utility connections, Tarion enrolment, and the discharge of the construction mortgage. Have them reviewed before closing, and check the levies against the caps in your agreement.
Other adjustments on the same statement
Property tax is one line. The rest usually includes:
- Condominium common expenses, prorated the same way
- Fuel oil or propane remaining in the tank, if applicable
- Rent and last month’s rent deposit where the property is tenanted
- The deposit already paid to the listing brokerage, credited to the buyer
- Utility arrears, where the municipality can add them to the tax roll
Frequently asked questions
What is a statement of adjustments? The one-page summary your lawyer prepares showing what the buyer owes on closing beyond the purchase price – property tax adjustments, condominium fees, the deposit already paid, and any other prorated items.
What gets prorated at closing? Property taxes, condominium common expenses, fuel oil or propane left in the tank, rent and the last month’s rent deposit on a tenanted property, and occasionally utilities where the municipality can add them to the tax roll.
Where do I get the statement of adjustments? From your own lawyer, usually a few days before closing. Read it – it is the document that tells you the exact certified funds to bring.
Are property taxes prorated at closing in Ontario? Always. The adjustment date is the closing date: the seller pays to the day before, the buyer pays from the closing date onward.
How do you calculate prorated taxes at closing? Divide the annual tax by 365 for a daily rate, then multiply by the number of days each party owns the property. On a $6,570 annual bill closing August 15, the daily rate is $18.00 and the buyer’s share of the rest of the year is 139 days, or $2,502.
What is the purpose of the adjustment? So neither party pays for days they did not own the home. Without it, whoever happened to have paid the tax bill would subsidise the other.
How close to market value is the assessed value? Not close, and not the same thing. MPAC assessments in Ontario are still based on a January 1, 2016 valuation date, so assessed values sit well below current market values. Your tax bill is based on the assessment, not on what you paid.
How can I reduce my property taxes in Ontario? By challenging the assessment, not the tax rate. File a Request for Reconsideration with MPAC if comparable properties are assessed lower. Note that a purchase price above the assessment does not, by itself, raise your assessment.
Closing a purchase or sale in Toronto
LD Law LLP prepares and reviews statements of adjustments on residential and commercial closings across Ontario, including builder statements on new construction where the adjustments are longest and least standard.
1551 Bloor Street West, Toronto · 416-747-9900
General information about Ontario conveyancing practice as of August 2026. Not legal advice.