Proration Calculations for the Florida Real Estate Exam: Step-by-Step Guide
The Reason Proration Is the Most Missed Math Topic on the Florida Exam
Proration itself is not complicated. You are splitting a cost between the buyer and seller based on how much of the year each party owned the property. The math is division and multiplication. Nothing harder than what a calculator can do in two steps.
The reason students miss proration questions on the Florida exam is not the math. It is the direction. Florida property taxes are paid in arrears, which means the tax bill for the current year is not due until the following year. That single fact reverses who owes whom at closing, and students who learned proration from a national textbook or a generic prep tool get the direction backwards on every Florida proration question.
Here is the mistake in one sentence: most students calculate the proration correctly and then credit it to the wrong party. They give the seller a credit when the seller should be debited, or they charge the buyer for taxes the seller already owes. On a question worth one point, the direction error turns a correct calculation into a wrong answer.
This post teaches proration the way the Florida exam tests it. Every example uses the 365-day method (the standard on the Florida exam), accounts for Florida's in-arrears tax system, and walks through each step so you can see exactly where the money goes and why.
The short version: Proration splits a cost between buyer and seller based on ownership days. In Florida, property taxes are paid in arrears (this year's taxes are paid next year). At closing, the seller has lived in the property for part of the current tax year but has not yet paid those taxes. The seller owes the buyer a credit for the seller's share of the unpaid taxes. The formula: annual cost divided by 365 equals the daily rate, then daily rate times the number of days the seller owned the property equals the seller's share, credited to the buyer. The direction is always: seller credits buyer for in-arrears taxes.
What This Post Covers
- Why Florida Proration Is Different From Other States
- The 365-Day Method (Step by Step)
- The Direction Rule: Who Credits Whom
- Worked Example 1: Basic Property Tax Proration
- Worked Example 2: Mid-Year Closing
- Worked Example 3: Closing After Taxes Have Been Paid
- Worked Example 4: Proration With Homestead Exemption
- Worked Example 5: Insurance Proration
- Worked Example 6: HOA Dues Proration
- Worked Example 7: Rent Proration
- Worked Example 8: Full Exam-Style Problem
- The 4 Traps in Proration Questions
- Quick Reference Formula Card
- Frequently Asked Questions
Why Florida Proration Is Different From Other States
In most states, property taxes are paid in advance. The homeowner pays the tax for the upcoming year at the beginning of that year. At closing, the seller has already paid taxes for the full year, so the buyer owes the seller a credit for the portion of the year the buyer will own the property.
Florida is the opposite. Property taxes are paid in arrears. The tax bill for the current year arrives in November and is due by March 31 of the following year. This means at the time of closing, the seller has been living in the property for months without having paid the current year's taxes.
The direction flips:
| Tax System | Who Has Already Paid | Who Owes at Closing | Direction |
|---|---|---|---|
| Paid in advance (most states) | Seller has pre-paid | Buyer owes seller for unused portion | Buyer credits seller |
| Paid in arrears (Florida) | Neither party has paid yet | Seller owes for days they occupied | Seller credits buyer |
If you learned proration from a national textbook, your instinct is to credit the seller. On the Florida exam, you credit the buyer. That is the single most important fact in this entire post.
The Florida Tax Calendar
| Event | Date |
|---|---|
| Tax year begins | January 1 |
| Tax year ends | December 31 |
| Tax bills mailed | November 1 |
| Discount period (4%) | November |
| Discount period (3%) | December |
| Discount period (2%) | January |
| Discount period (1%) | February |
| Taxes due (no discount) | March 31 |
| Taxes delinquent | April 1 |
At a typical closing in, say, June, the current year's taxes have not been billed yet (bills go out in November) and certainly have not been paid. The seller has occupied the property from January 1 through the closing date and owes their share of the annual tax. That amount is credited to the buyer at closing so the buyer can pay the full tax bill when it arrives in November.
The 365-Day Method (Step by Step)
The Florida exam uses the 365-day method (also called the actual-day method). Some other states use a 360-day method or a 12-month method. On the Florida exam, unless the question specifies otherwise, use 365 days.
The Formula
Step 1: Calculate the daily rate.
Annual cost / 365 = daily rate
Step 2: Count the seller's days of ownership. Count from January 1 through the day of closing (inclusive or exclusive depending on the closing convention stated in the question). If the question does not specify, the standard Florida convention is that the seller owns the day of closing (the day of closing is the seller's day).
Step 3: Calculate the seller's share.
Daily rate x seller's days = seller's share
Step 4: Determine the direction (credit/debit). For in-arrears items (property taxes): the seller's share is credited to the buyer (debited from the seller). For pre-paid items (insurance, HOA dues paid in advance): the buyer's share is credited to the seller.
The Direction Rule: Who Credits Whom
This is the concept that turns correct calculations into correct answers. Memorize this table:
| Item | Payment Timing | At Closing | Direction |
|---|---|---|---|
| Property taxes (Florida) | Paid in arrears | Seller has NOT paid | Seller credits buyer |
| Prepaid insurance | Paid in advance | Seller HAS paid for full year | Buyer credits seller (for unused months) |
| HOA dues (paid in advance) | Paid in advance | Seller HAS paid for current period | Buyer credits seller (for remaining days) |
| HOA dues (paid in arrears) | Paid in arrears | Seller has NOT paid | Seller credits buyer |
| Rent (tenant has paid current month) | Paid in advance | Seller HAS collected | Seller credits buyer (for buyer's portion of the month) |
The rule is consistent: whoever has the money (or the obligation to pay) that belongs to the other party, credits the other party. In arrears means the seller owes. In advance means the seller is owed.
Worked Example 1: Basic Property Tax Proration
Facts: Closing date is July 15. Annual property taxes are $4,380. Taxes are paid in arrears. The day of closing belongs to the seller. Use a 365-day year.
Step 1: Daily rate $4,380 / 365 = $12.00 per day
Step 2: Seller's days January 1 through July 15 = 196 days (January 31 + February 28 + March 31 + April 30 + May 31 + June 30 + July 15 = 196)
Step 3: Seller's share $12.00 x 196 = $2,352.00
Step 4: Direction Taxes are in arrears. Seller has not paid. Seller credits buyer $2,352.00.
Answer: Seller is debited $2,352.00. Buyer is credited $2,352.00.
Worked Example 2: Mid-Year Closing With Odd Numbers
Facts: Closing date is September 22. Annual property taxes are $5,475. Taxes are paid in arrears. Day of closing belongs to the seller. Use a 365-day year.
Step 1: Daily rate $5,475 / 365 = $15.00 per day
Step 2: Seller's days January 1 through September 22 = 265 days (31 + 28 + 31 + 30 + 31 + 30 + 31 + 31 + 22 = 265)
Step 3: Seller's share $15.00 x 265 = $3,975.00
Step 4: Direction In arrears. Seller credits buyer $3,975.00.
Answer: Seller is debited $3,975.00. Buyer is credited $3,975.00.
Counting tip for the exam: Memorize the cumulative day counts for each month-end:
| Month End | Cumulative Days |
|---|---|
| January 31 | 31 |
| February 28 | 59 |
| March 31 | 90 |
| April 30 | 120 |
| May 31 | 151 |
| June 30 | 181 |
| July 31 | 212 |
| August 31 | 243 |
| September 30 | 273 |
| October 31 | 304 |
| November 30 | 334 |
| December 31 | 365 |
For September 22: cumulative through August 31 is 243, plus 22 days in September = 265.
Worked Example 3: Closing After Taxes Have Been Paid
Facts: Closing date is February 10. The seller paid the previous year's property taxes in full ($3,650) in November. The current year's taxes are estimated at $3,650 (same amount). Day of closing belongs to the seller. Use a 365-day year.
Step 1: The previous year's taxes are already paid. No proration needed for those.
Step 2: For the current year, taxes are in arrears and not yet due. The seller has occupied the property from January 1 through February 10 = 41 days.
Step 3: Daily rate for current year $3,650 / 365 = $10.00 per day
Step 4: Seller's share of current year taxes $10.00 x 41 = $410.00
Direction: Seller credits buyer $410.00 for the seller's share of current year taxes that have not been paid yet.
Answer: Seller is debited $410.00. Buyer is credited $410.00.
The trap: Some students think that because the seller already paid the previous year's taxes, no proration is needed. But the question is about the current year's taxes, which are a separate, unpaid obligation in the arrears system.
Worked Example 4: Proration With Homestead Exemption
Facts: Closing date is August 1. The property has a homestead exemption. Assessed value is $200,000. Total millage rate is 20 mills (8 mills school, 12 mills non-school). Day of closing belongs to the seller. Use a 365-day year.
Step 1: Calculate the annual tax (with homestead split)
School taxable value: $200,000 minus $25,000 = $175,000 School tax: $175,000 x 0.008 = $1,400
Non-school taxable value: $200,000 minus $50,000 = $150,000 Non-school tax: $150,000 x 0.012 = $1,800
Total annual tax: $1,400 + $1,800 = $3,200
Step 2: Daily rate $3,200 / 365 = $8.767 per day (round to nearest cent at the end)
Step 3: Seller's days January 1 through August 1 = 213 days (31 + 28 + 31 + 30 + 31 + 30 + 31 + 1 = 213)
Step 4: Seller's share $8.767 x 213 = $1,867.37 (rounded)
Direction: In arrears. Seller credits buyer $1,867.37.
Why this question is harder: It combines the homestead exemption school/non-school split with the proration calculation. You must calculate the correct annual tax first, then prorate. Students who apply the full $50,000 exemption to all taxes get a different annual tax ($200,000 minus $50,000 = $150,000 x 0.020 = $3,000) and a different proration ($3,000 / 365 x 213 = $1,750.68). Both $1,867.37 and $1,750.68 will be among the answer choices.
Worked Example 5: Insurance Proration
Facts: The seller purchased a 1-year hazard insurance policy for $1,825 on March 1. Closing date is October 15. The buyer is assuming the seller's insurance policy. Day of closing belongs to the seller. Use a 365-day year.
Step 1: The insurance policy runs from March 1 through the following February 28.
Step 2: The seller has used the policy from March 1 through October 15 = 229 days. (March 31 + April 30 + May 31 + June 30 + July 31 + August 31 + September 30 + October 1-15 = 229)
Step 3: Remaining days on the policy: 365 minus 229 = 136 days. This is the buyer's portion.
Step 4: Daily rate $1,825 / 365 = $5.00 per day
Step 5: Buyer owes seller for unused insurance $5.00 x 136 = $680.00
Direction: Insurance was paid in advance by the seller. The buyer is assuming the remaining coverage. Buyer credits seller $680.00.
Key difference from tax proration: The direction flips because insurance is pre-paid, not in arrears. The seller already paid for the full year. The buyer owes the seller for the unused portion.
Worked Example 6: HOA Dues Proration
Facts: The quarterly HOA dues are $900, paid in advance on January 1, April 1, July 1, and October 1. Closing date is August 20. Day of closing belongs to the seller.
Step 1: The current quarter runs from July 1 through September 30 (92 days). The seller paid $900 on July 1 for this quarter.
Step 2: Daily rate for the quarter $900 / 92 = $9.783 per day
Step 3: Seller's days in the current quarter July 1 through August 20 = 51 days (31 + 20)
Step 4: Buyer's days in the current quarter 92 minus 51 = 41 days
Step 5: Buyer owes seller for buyer's portion $9.783 x 41 = $401.10 (rounded)
Direction: HOA dues were paid in advance by the seller. Buyer credits seller $401.10.
Worked Example 7: Rent Proration
Facts: The property being sold is a rental unit. The tenant has paid September rent of $1,500. Closing date is September 12. Day of closing belongs to the seller.
Step 1: September has 30 days. The seller owns days 1 through 12 (12 days). The buyer owns days 13 through 30 (18 days).
Step 2: Daily rent $1,500 / 30 = $50.00 per day
Step 3: Buyer's share of September rent $50.00 x 18 = $900.00
Direction: The seller has already collected the full month's rent. The buyer is entitled to rent for the days they own the property. Seller credits buyer $900.00.
Worked Example 8: Full Exam-Style Problem
Facts: A property closes on May 18. Annual property taxes are $6,205. The seller prepaid a 1-year insurance policy for $2,190 starting January 1. Monthly HOA dues of $350 are paid in arrears. Day of closing belongs to the seller. Use a 365-day year. What are the proration adjustments at closing?
Property Tax (in arrears):
- Daily rate: $6,205 / 365 = $17.00 per day
- Seller's days: January 1 through May 18 = 138 days (31 + 28 + 31 + 30 + 18)
- Seller's share: $17.00 x 138 = $2,346.00
- Direction: Seller credits buyer $2,346.00
Insurance (prepaid by seller):
- Daily rate: $2,190 / 365 = $6.00 per day
- Seller's days used: January 1 through May 18 = 138 days
- Remaining days: 365 minus 138 = 227 days (buyer's portion)
- Buyer owes: $6.00 x 227 = $1,362.00
- Direction: Buyer credits seller $1,362.00
HOA Dues (in arrears):
- May has 31 days. Seller owns days 1 through 18 (18 days).
- Daily rate: $350 / 31 = $11.29 per day
- Seller's share of May dues: $11.29 x 18 = $203.22
- Direction: Seller credits buyer $203.22
Summary:
| Item | Seller Debit | Buyer Credit | Seller Credit | Buyer Debit |
|---|---|---|---|---|
| Property tax | $2,346.00 | $2,346.00 | ||
| Insurance | $1,362.00 | $1,362.00 | ||
| HOA dues | $203.22 | $203.22 |
This is the complexity level the exam can reach. It combines three different proration items with different payment timings (arrears and advance) in a single question. Students who understand the direction rule handle each item independently and get the answer. Students who apply one direction to all three items get two of the three wrong.
The 4 Traps in Proration Questions
Trap 1: Reversing the Direction for In-Arrears Taxes
This is the number one proration mistake. Students calculate the correct dollar amount and credit it to the seller instead of the buyer. In Florida, unpaid in-arrears taxes are the seller's obligation. The seller credits the buyer. Always.
Trap 2: Using 360 Days Instead of 365
Some national textbooks teach the banker's year (360 days, 30 days per month). The Florida exam uses the 365-day (actual day) method unless the question specifies otherwise. Using 360 days produces a slightly different daily rate and a wrong answer. If the question says "use a 365-day year," use 365. If the question says "use a 360-day year" or "use the banker's year," use 360. If the question says nothing, default to 365 for the Florida exam.
Trap 3: Miscounting the Day of Closing
The convention on the Florida exam is that the day of closing belongs to the seller unless the question states otherwise. This means if closing is July 15, the seller's days run through and including July 15. The buyer's first day is July 16. One day of miscounting at $12 per day does not sound significant, but when two answer choices differ by exactly $12, that one-day error is the difference between the right and wrong answer.
Trap 4: Prorating the Wrong Year's Taxes
If a question mentions that the previous year's taxes were $4,000 and the current year's estimated taxes are $4,200, make sure you prorate the correct year. At closing, you prorate the current year's taxes (the ones that have not been paid yet in the arrears system), not the previous year's taxes (which are either already paid or are a separate line item on the closing statement).
Quick Reference Formula Card
Screenshot this for exam day review.
| Step | Formula | Example |
|---|---|---|
| 1. Daily rate | Annual cost / 365 | $4,380 / 365 = $12.00 |
| 2. Seller's days | Count January 1 through closing date (inclusive) | Jan 1 to July 15 = 196 days |
| 3. Seller's share | Daily rate x seller's days | $12.00 x 196 = $2,352.00 |
| 4. Direction (arrears) | Seller credits buyer | Seller debited $2,352, buyer credited $2,352 |
| 4. Direction (advance) | Buyer credits seller for unused portion | Buyer debited, seller credited |
Day of closing: Belongs to the seller (unless question states otherwise) Year method: 365 days (unless question specifies 360) Florida taxes: Paid in arrears. Seller always credits buyer for unpaid taxes.
Monthly cumulative day count: Jan 31 | Feb 59 | Mar 90 | Apr 120 | May 151 | Jun 181 | Jul 212 | Aug 243 | Sep 273 | Oct 304 | Nov 334 | Dec 365
Pass Florida's Math Coach teaches proration step by step with interactive problems that adjust the closing date, the tax amount, and the payment timing (arrears vs advance) so you practice every variation the exam can throw at you. The app also covers commission, documentary stamps, homestead exemption tax calculations, and 6 other Florida-specific math topics. Download Pass Florida and practice proration until the direction rule is automatic.
Frequently Asked Questions
Are Florida property taxes paid in advance or in arrears?
In arrears. The property tax bill for the current calendar year (January 1 through December 31) is mailed in November and is due by March 31 of the following year. This means at any closing during the year, the current year's taxes have not been paid. The seller owes their share, credited to the buyer at closing.
Does the Florida exam use the 365-day method or the 360-day method?
The standard method on the Florida exam is 365 days (actual days). Some questions may specify a 360-day year or "banker's year" in which case you use 360. If the question does not specify, default to 365.
Who owns the day of closing for proration purposes?
On the Florida exam, the seller owns the day of closing unless the question states otherwise. The seller's days run from January 1 through and including the closing date. The buyer's first day of ownership is the day after closing.
How do I know whether to credit the buyer or the seller?
Use the direction rule: if the item is paid in arrears (like Florida property taxes), the seller owes money and credits the buyer. If the item is paid in advance (like a prepaid insurance policy), the seller has already paid and the buyer credits the seller for the unused portion. The key question is: has the money already been paid? If not (arrears), seller credits buyer. If yes (advance), buyer credits seller.
What if the question gives me last year's taxes and this year's estimated taxes?
Prorate the current year's estimated taxes, not last year's. The current year is the one where the seller has an unpaid obligation (in the arrears system). Previous year taxes are either already paid or are a separate line item on the closing statement. If the question does not mention estimated taxes and only gives a tax amount, assume that amount applies to the current year.
How many proration questions are on the Florida real estate exam?
Typically 1 to 3 questions involve proration directly. Additional questions may test the concept indirectly through closing statement scenarios or documentary stamp and closing cost calculations. Proration is one of the 6 core math topics on the exam.
Can proration appear in an EXCEPT/NOT question?
Yes. For example: "All of the following are debited to the seller at closing EXCEPT..." with proration-related items among the choices. In that format, you need to know both the calculation and the direction to evaluate each choice correctly. The EXCEPT/NOT question guide covers the technique for handling this format.
Is proration the hardest math topic on the Florida exam?
Students report it as the most confusing math topic, primarily because of the in-arrears direction reversal. The actual arithmetic is simpler than commission splits through two brokerages or homestead exemption calculations with the school tax split. The difficulty is conceptual (who owes whom), not mathematical.
Related:
Florida Real Estate Exam Math Formulas You Need to Memorize
Florida Homestead Exemption and the Save Our Homes Cap: What the Exam Tests
Florida Real Estate Exam Documentary Stamps and Closing Costs
How to Calculate Real Estate Commission for the Florida Exam
15 Florida Real Estate Exam Tips That Actually Move the Needle
How Hard Is the Florida Real Estate Exam? (Honest Breakdown)
The 19 Topics on the Florida Real Estate Exam and How Much Each Is Weighted
How to Pass the Florida Real Estate Exam on Your First Attempt
Florida Real Estate Exam App: Pass the Exam With 850+ Practice Questions
How to Stop Getting EXCEPT and NOT Questions Wrong on the Florida Exam