You glance at your closing statement and see a tax proration line that shifts hundreds of dollars. In Chicago, that line often looks different than it does in other markets. If you are buying or selling in South Shore, you deserve a clear, local explanation of what is happening and why. This guide breaks down Chicago’s 105 to 110 percent practice, shows you simple math examples, and outlines winter-closing tips so you can plan your bottom line with confidence. Let’s dive in.
What tax proration means
Tax prorations split a property’s annual tax bill between buyer and seller based on how long each owned the home during the tax year. The closing date is the dividing line. Title will calculate a daily amount from an annual figure, then allocate the seller’s share and the buyer’s share.
In Chicago and Cook County, the current year’s final bill is often not available at closing. That is why prorations commonly use the most recent annual bill as a starting point.
Why Chicago uses 105 to 110 percent
When the current year’s bill is not out, many Chicago contracts and title companies apply a 105 to 110 percent multiplier to the prior year’s bill. This buffer helps cover increases, omitted assessments, or new levies that are not reflected in the last bill. It reduces the risk that anyone must settle extra funds after closing.
The purchase contract and local practice set the approach. The title company executes the prorations per the contract. Your lender may also collect an escrow cushion, which affects your cash to close but not the proration math itself.
How prorations are calculated
Here is the basic method when an annual figure is known:
- Daily tax amount = annual tax amount ÷ 365
- Seller credit = daily tax amount × number of days the seller owned the property in the tax year
- Buyer pays the remainder of the annual amount at closing
If the current year’s bill is available and reliable, prorations often use 100 percent of that bill. If not, South Shore closings commonly use 105 to 110 percent of the prior year’s bill.
Cook County issues taxes in installments. Title will reconcile any installments the seller already paid and apply the contract’s proration basis to the full year or installments, as specified.
South Shore examples you can follow
To keep the math simple, assume the prior year’s annual tax bill is $3,600 and the seller has not paid this year’s installments yet. We will use a 365-day year.
Example 1: Closing on June 30 using 105 percent
- Annual amount for proration: $3,600 × 1.05 = $3,780
- Daily amount: $3,780 ÷ 365 = $10.36
- Days seller owned in year: 181
- Seller credit: 181 × $10.36 = $1,875.16
- Buyer pays the remainder at closing: $3,780 − $1,875.16 = $1,904.84
Compared with using 100 percent of the prior year’s bill, the seller’s credit increases by $90.50 and the buyer’s immediate share increases by the same amount. As the closing date moves later in the year, the dollar difference grows.
Example 2: How escrow affects buyer cash to close
Lender escrow requirements are separate from prorations. Many lenders collect an initial escrow deposit for property taxes at closing. This is on top of the buyer’s proration share.
Using the same June 30 scenario above, assume the lender estimates taxes from the $3,600 prior-year bill and collects 4 months into escrow:
- Monthly tax estimate: $3,600 ÷ 12 = $300
- Initial tax escrow deposit: 4 × $300 = $1,200
- Buyer’s proration share from Example 1: $1,904.84
- Tax-related funds due at closing (escrow plus proration): $3,104.84
This shows why buyers can feel a bigger impact from escrow than from the 5 to 10 percent buffer itself. The escrow is a lender requirement, not a county charge, and it funds your future tax payments.
Winter closing specifics in South Shore
- Bill timing. Many winter closings occur before the county issues the next tax year’s bill. That is why prior-year amount plus a buffer is common.
- Installments. Whether earlier installments have been paid affects credits and debits. Title will confirm what was paid and true up the statement.
- Escrow cushions. Lenders often collect several months of taxes and your first year of homeowner’s insurance at closing. This can add hundreds to a few thousand dollars to your cash to close.
- Proration risk. Using 105 to 110 percent helps reduce the chance of under-proration. If actual bills differ later, the parties may reconcile per contract and title instructions.
Who calculates and what to confirm
- Contract terms. Your purchase contract sets the proration basis, including whether to use 100 percent of the current bill or 105 to 110 percent of the prior year.
- Title company. The title or closing agent prepares the final proration and closing statement and reconciles any installments already paid.
- Lender. Your lender determines the escrow deposit they will collect. This does not change the proration math but does change buyer cash to close.
Always verify the parcel’s latest tax status with the title company or the county offices. Tax bills, assessment changes, and due dates are parcel-specific and can change each year.
Buyer checklist
- Ask your lender how many months of taxes and insurance they will collect at closing for escrow.
- Request an estimated closing statement from the title company early. Review the proration line and the escrow deposit side by side.
- If prorations use 105 to 110 percent of the prior year’s bill, run the dollar impact so you are not surprised at closing.
- Confirm whether any installments have been paid and how those payments will be credited.
Seller checklist
- Ask your listing agent and title company which proration basis will be used: 100 percent of a current bill or a 105 to 110 percent buffer on the prior year.
- Provide proof of any tax installments you have already paid this year so title can credit you properly.
- If you expect to close in winter, review how the buffer affects your net proceeds.
- Confirm that any unpaid special assessments or tax liens are identified and handled on the title report.
Next steps
A little preparation goes a long way. Confirm the contract’s proration language, request the parcel’s most recent tax bill details, and get your lender’s escrow estimate in writing. If you want a second set of eyes on your numbers or a strategy for timing your South Shore closing, reach out to Julie Latsko for clear, local guidance.
FAQs
Why does Chicago often use 105 to 110 percent for prorations?
- It adds a conservative cushion against increases or omitted assessments that are not reflected in the prior year’s bill and reduces post-closing adjustments.
Who decides which multiplier is used in my deal?
- The purchase contract sets it, and the title company follows that language; parties can negotiate a different approach if they agree.
Does the multiplier change who ultimately pays the tax bill?
- No; it only changes the allocation at closing. When the actual bill arrives, any difference is handled per the contract and title instructions.
How big is the impact on my closing costs as a buyer?
- On a few-thousand-dollar annual bill, the 5 to 10 percent buffer usually moves a few hundred dollars; lender escrow deposits often have a larger effect.
What should I watch for with winter closings in South Shore?
- Expect to use the prior year’s bill with a buffer, verify any installments already paid, and get your lender’s escrow requirements early so you can plan funds.
