General information, not legal or tax advice

Property Tax Proration at Closing in Tennessee

Property taxes in Coffee County are billed once a year, and the bill for a year does not go out until October of that year. So when a home sells in June, the seller has owned it for half the year, but nobody has a bill yet. Proration is how your closing statement splits the year's taxes so the buyer and the seller each pay for the part of the year they owned the home.

This guide explains how the timing works here, what happens in each part of the year, how the day count works and where the split shows up on your Closing Disclosure. It is general information from Coffee County, the City of Manchester, Tennessee statutes, the Consumer Financial Protection Bureau (CFPB), federal rules and the IRS. It is not legal or tax advice. Your purchase contract and your closing agent set the actual figures.

How Coffee County property taxes are timed

The Coffee County Trustee and Property Assessor describe the calendar this way:

• The tax year is the calendar year, January 1 through December 31.
• January 1 is the assessment date. The Assessor says property is assessed to the person whose name is on the deed as of January 1, and the Trustee mails tax notices to the owner of record as of January 1.
• Tax rates are usually set in July. The Assessor lists July as the general time frame for the County Commission and city boards to set budgets and tax rates.
• Bills go out in October. Tennessee law, TCA 67 1 701, makes state, county and municipal taxes collected under it payable the first Monday in October. The Trustee's payment period runs from the first Monday of October through the last day of February of the next year.
• March 1 is the delinquency date. Under TCA 67 5 2010, interest of 1.5 percent is added on March 1 and on the first day of each month after that. The Trustee says delinquent taxes are turned over to Chancery Court on April 1.

In other words, Coffee County taxes are paid near the end of the year they cover, or early in the next year. That timing is what drives most of the questions at closing.

Homes inside Manchester city limits

A home inside the city limits of Manchester has a city tax bill as well as the county bill. The City of Manchester Finance Department says city property tax must be paid by the last day of February, and that partial payments are accepted only in person at the Property Tax Office at City Hall, 200 W. Fort Street, in up to four payments. Homes inside Tullahoma city limits also pay a city rate, so ask the city about its bill. My Coffee County property taxes guide explains how the county and city rates combine.

Why taxes are split at closing

Under TCA 67 5 2101, property taxes become a first lien on the property from January 1 of the year they are assessed for, and they are also a personal debt of the owner as of January 1. That is why the closing agent pays close attention to taxes: an unpaid bill stays with the property.

The IRS explains the split in Publication 530: real estate taxes are generally divided so that the buyer and the seller each pay the taxes for the part of the property tax year each owned the home. The IRS also notes that settlement costs are divided according to the sales contract, local custom or the understanding of the parties. In Tennessee, that means your purchase contract is where the method is set, including which figure to use when the year's bill is not out yet.

The three closing windows

Closing from March through September

This window covers most of the year. The current year's bill has not been mailed, and the seller will not be the one who pays it. The buyer will owe the whole bill in the fall, including the months the seller owned the home.

So the seller's share of the year is settled at closing, as your contract provides, usually as a credit from the seller to the buyer. On the buyer's Closing Disclosure, the federal rule at 12 CFR 1026.38(j)(2) places this credit under the heading "Adjustments for Items Unpaid by Seller," with separate lines for City/Town Taxes and County Taxes, each showing the time period covered.

Because the year's rate and bill are not final yet, the credit has to be based on an estimate. Ask your closing agent which figure is being used and whether your contract calls for any adjustment once the real bill comes out. This matters more than usual for 2026, because Coffee County completed a reappraisal this year. The Assessor says a higher appraised value does not automatically mean a higher tax bill, since the certified tax rate law is meant to keep the new rate revenue neutral, but an individual bill can still go up or down depending on how that home's value changed compared with the rest of the county.

Closing from October through December

Now the year's bill is out, and the question is whether it has been paid.

• If the seller already paid it, the buyer reimburses the seller for the buyer's share of the year. On the buyer's Closing Disclosure, 12 CFR 1026.38(j)(1) places this under "Adjustments for Items Paid by Seller in Advance."
• If it has not been paid yet, ask your closing agent whether the bill will be paid at closing and how each side's share will be charged.

Either way, bring a copy of the bill or look it up on the Trustee's online tax search so everyone is working from the same number.

Closing in January or February

Two tax years are in play. The prior year's bill may still be open, since the payment period runs through the last day of February. The seller owned the home for all of the prior year, so that bill is generally the seller's to pay, and it is already a lien on the property under TCA 67 5 2101. The new year has started too, and its bill will not come out until October, so the seller's share of the new year is settled at closing the same way as in the March through September window.

If a closing slips past March 1 with the prior year unpaid, interest starts under TCA 67 5 2010. The IRS adds that if a buyer agrees to pay a seller's unpaid taxes from an earlier year, the buyer cannot deduct them and instead treats them as part of the cost of the home.

How the day count works

Proration is figured by days. For federal income tax purposes, the IRS treats the seller as paying the taxes up to, but not including, the date of sale, and the buyer as paying from the date of sale on.

Here is how the days work for a closing on June 30 in a 365 day year:

• Seller: January 1 through June 29 is 180 days.
• Buyer: June 30 through December 31 is 185 days.
• The split: the seller's share is 180 divided by 365, or about 49.3 percent of the year's tax. The buyer's share is the rest.

The IRS uses the same method in its own example in Publication 530, where a September 1 purchase gives the buyer 122 days of the year. Your purchase contract may treat the closing day differently, and the closing agent's figures are the ones that count.

Proration is not the same as your escrow deposit

If you have a mortgage, your Closing Disclosure may show two different tax items, and it helps to keep them apart.

• The proration settles the year between you and the seller.
• The escrow deposit funds your lender's account for future bills. The CFPB says an escrow account is set up by your lender to pay certain property expenses, such as taxes and insurance, from part of each monthly payment, and that many lenders require one.

Under the federal rule at 12 CFR 1024.17(c)(1), at closing the servicer may collect enough to cover taxes and insurance for the period from when they were last paid until your first payment date, plus a cushion of no more than one sixth of the estimated total yearly payments. After that, the monthly escrow amount is generally one twelfth of the expected yearly payments, plus any allowed cushion. Because Coffee County bills once a year, ask your lender when it plans to pay your first bill and for which tax year.

No escrow account? The CFPB says to budget for these bills yourself, and warns that unpaid property taxes can bring penalties, a tax lien and even foreclosure.

For buyers: watch for your first bill

The Trustee mails notices to the owner of record as of January 1. If you buy a home after January 1, the October bill for that year will generally go to the seller, not to you. The Trustee also says Tennessee law does not require tax notices to be mailed, and that not receiving a bill does not excuse payment or waive penalty and interest.

So plan ahead. If your lender pays from escrow, confirm it has the parcel information. If you pay yourself, look up the bill on the Trustee's online tax search in October, or call the Trustee at (931) 723 5128. The Trustee says mailing address changes go through the Property Assessor at (931) 723 5126. If the home is inside Manchester city limits, check the city bill too.

For sellers

The seller side of the Closing Disclosure carries the same adjustments. Under 12 CFR 1026.38(k), a credit you owe the buyer for unpaid taxes appears under "Adjustments for Items Unpaid by Seller" and reduces your proceeds, while a reimbursement for taxes you already paid adds to them.

A few related points:

• Your escrow refund. If your loan had an escrow account, the federal rule at 12 CFR 1024.34(b) says the servicer must return the remaining balance within 20 days of payoff, not counting legal public holidays, Saturdays and Sundays. My selling a house with a mortgage guide explains the payoff and the refund.
• Your income taxes. The IRS says buyer and seller are each considered to have paid their own share of the year's taxes and can each deduct their own share if they itemize. Ask a tax professional how this applies to you.
• Your full cost picture. My seller closing costs guide lists the other items that come out of a sale.

A proration checklist

• Get the most recent county tax bill, and the city bill if the home is inside city limits
• Confirm whether the home is inside Manchester or Tullahoma city limits
• Ask the closing agent which figure the proration uses and what dates it covers
• Ask whether your contract calls for any adjustment after the real bill comes out
• Review the tax adjustment lines on your Closing Disclosure, which you should receive at least three business days before closing
• Buyers: plan for the October bill, since the notice may go to the prior owner
• Buyers: update your mailing address with the Property Assessor at (931) 723 5126
• Sellers: keep your paid tax receipts handy for the closing agent

How I help

I do not prepare closing figures or give tax advice. What I do is make sure the purchase contract, the closing agent and the lender are working from the same dates and the same tax information, and walk through your Closing Disclosure with you before you sign, so the tax lines make sense.

Keep reading:

• Buyer closing costs in Tennessee
• Seller closing costs in Tennessee
• Coffee County property taxes
• Closing day and the final walk through
• Real estate glossary
• All Manchester guides

Fair housing note: I work with every buyer and seller and follow the same steps for everyone.

This guide is general information from public sources, not legal or tax advice. Tax rates, due dates and closing practices can change, so confirm the details with the Coffee County Trustee, the city, your closing agent and a tax professional.

Buying or selling in Manchester?

I can help you line up the dates and numbers before closing. Call or text me at (615) 497 1658, or request my buyer guide below.

Common questions

Matt Sargent is a Tennessee licensed affiliate broker with Keller Williams who helps buyers and sellers in Manchester and Coffee County. Call (615) 497 1658 or send a message.