Property taxes are one of the most misunderstood aspects of a real estate closing in the Chicago metro area. Whether you're buying or selling in Cook, DuPage, Lake, Will, Kane, or McHenry County, you need to understand how taxes are prorated — and where the pitfalls lie. The "paid in arrears" system that Illinois uses can create confusion, unexpected credits, and genuine financial risk if the proration isn't handled thoughtfully.
The Arrears System: Why You're Always Playing Catch-Up
In Illinois, property taxes are paid in arrears, meaning you're paying for the privilege of having owned the property during a prior year. In Cook County, the first installment (typically due around March 1) is estimated at 55% of the prior year's total bill, and the second installment (due later in the summer or fall, depending on the year) covers the balance once the actual assessed value and tax rate are finalized. In the collar counties, tax bills generally arrive in the spring with two installments due in June and September, though exact timing varies by county.
What this means at a closing is straightforward in theory but tricky in practice: if you sell your home on June 15, you've owned it from January 1 through June 15 of the current year, but the tax bill for the current year won't be issued until next year. The buyer will be the one receiving and paying that future bill. So the seller needs to give the buyer a credit at closing to cover the seller's share of the taxes for the portion of the year the seller occupied the property. On top of that, there may be a prior year's second installment that hasn't yet been paid.
How the Multi-Board 8.0 Contract Handles It
The Multi-Board Residential Real Estate Contract 8.0, widely used across the Chicago metro area, addresses tax prorations in Paragraph 12. The key provision states that general real estate taxes are prorated to and including the date of closing based on a specified percentage of the most recent ascertainable full year tax bill. That percentage is filled in by the parties — and the number chosen matters a great deal.
The contract provides that all general real estate tax prorations are final as of closing unless the parties agree otherwise in writing or Paragraph 12(b) applies. This "final at closing" language is significant: it means that once the closing statement is signed, neither party can come back and ask for an adjustment when the actual tax bill arrives, unless the contract specifically allows for it.
The percentage inserted into that blank is where negotiation and judgment come in. In a typical year with stable assessments, using 100% of the prior year's bill is common and usually close enough. But in years where assessments are changing — and in this part of Illinois, they're always changing somewhere — 100% can leave one party significantly short.
Reassessment Years: The Hidden Landmine
This is where things get interesting, and where buyers and sellers most often get burned.
Cook County reassesses property on a triennial cycle, rotating through three geographic regions: the north and northwest suburbs, the south and west suburbs, and the City of Chicago. When your township's reassessment year comes around, your assessed value can change dramatically — sometimes jumping 20%, 30%, or more, particularly if the property has been recently improved, the neighborhood has appreciated sharply, or the prior assessment was artificially low.
The collar counties operate on a quadrennial reassessment cycle (every four years), though individual counties may adjust values annually through equalization factors and multipliers. DuPage County, for instance, reassesses every four years with annual equalization. Kane, Lake, McHenry, and Will Counties follow similar patterns, though the specific timing and methodology vary.
Here's the problem: when a closing occurs in a reassessment year, the most recent ascertainable full year tax bill may be based on the old assessed value. If you prorate at 100% of that bill and the new assessment is significantly higher, the buyer ends up paying the difference out of pocket when the actual bill arrives — effectively subsidizing the seller's share of the increase. Conversely, if assessments drop (as they occasionally do after successful appeals), a proration above 100% could over-credit the buyer at the seller's expense.
Options for Handling Reassessment-Year Closings
There are several strategies that attorneys and agents use to address this, and the best approach depends on the specific circumstances.
Prorate at a higher percentage. The simplest method is to agree on a percentage above 100% — say 105% or 110% — to account for an anticipated increase. This is a rough estimate, but it can help close the gap. The challenge is agreeing on the right number when neither party knows exactly what the new bill will be. This approach keeps the proration final at closing, which has the advantage of a clean break between the parties.
Use known reassessment data. In many cases, the new assessed value has already been published by the assessor's office even though the tax bill hasn't been issued yet. When this happens, you can calculate an estimated new tax bill by applying the most recent tax rate and equalization factor to the new assessed value. This gives both parties a much more accurate basis for the proration. Attorneys experienced in Illinois closings will often run this calculation and propose a proration percentage that reflects the projected increase or decrease. Keep in mind that the tax rate itself may also change, so the estimate won't be exact — but it's far better than ignoring the reassessment entirely.
Agree to a re-proration. Rather than making the proration final at closing, the parties can agree in writing that taxes will be re-prorated once the actual tax bill is issued. The contract permits this — Paragraph 12 makes prorations final "except as otherwise agreed by the Parties in writing." Under a re-proration agreement, the closing uses the best available estimate, and when the actual bill comes in, the attorneys recalculate each party's share and issue a check for the difference. This protects both sides but keeps the parties financially entangled after closing, which some people prefer to avoid.
Establish a tax escrow. A more formal version of the re-proration approach is to escrow funds at closing — typically held by the title company — to cover a potential tax shortfall. Once the actual bill is known, the escrow is disbursed according to the correct proration. This provides security for the buyer, since the funds are already set aside, and it limits the seller's exposure to a defined amount. The contract's Paragraph 12(b) already contemplates an escrow for properties that haven't been previously taxed as currently improved, depositing 3% of the purchase price. While that specific provision addresses new construction or major improvements, the same escrow concept can be adapted by agreement for reassessment situations.
Other Things to Watch For
Exemptions that don't carry over. The contract addresses this in Paragraph 12(a): if the most recent tax bill reflects a homeowner exemption, senior citizen exemption, senior freeze, or other exemption, the proration should account for whether the seller is lawfully entitled to those exemptions and whether the buyer will qualify for them going forward. A senior freeze, for example, can significantly reduce a tax bill. If the seller has been receiving a freeze and the buyer won't qualify, the actual taxes going forward will be notably higher than what the recent bill would suggest. Make sure the proration reflects the taxes the property will actually generate, not just what the seller has been paying.
New construction and recent improvements. If a property has been recently built or substantially improved, the current tax bill may not reflect the full assessed value of the improvements. Paragraph 12(b) of the contract addresses this directly: when the property hasn't been previously taxed for the entire year as currently improved, 3% of the purchase price is deposited in escrow. When the actual taxes are determined, the escrow is used to settle up. This is critical for new builds, gut rehabs, and major additions — the first full tax bill on the improved property can be dramatically higher than anything the seller has been paying.
The equalization factor. In Cook County, the state equalization factor (sometimes called the "multiplier") is applied to assessed values each year and can change the effective tax burden even in non-reassessment years. When estimating future taxes based on a new assessed value, make sure the calculation uses the current equalization factor, and be aware that it may change.
Appeal timing. If the seller has filed a property tax appeal that hasn't been resolved, or if the new assessment is being contested, the eventual tax bill is uncertain. The parties should discuss how to handle this — a re-proration agreement or escrow is usually the safest approach.
The Bottom Line
Real estate tax prorations in the Chicago area are more than just a math exercise. They require attention to the reassessment cycle, awareness of exemptions and equalization factors, and a clear agreement between buyer and seller about how to handle uncertainty. The Multi-Board 8.0 contract provides a solid framework, but the blank percentage and the option for written agreements give the parties room — and responsibility — to tailor the proration to the actual circumstances of the transaction.
If you're buying or selling in a reassessment year, or if the property has had recent improvements or carries exemptions, talk to your attorney early in the process about the best proration strategy. A well-handled tax proration protects both sides and avoids the unpleasant surprise of a tax bill that doesn't match what anyone expected.
This post is for informational purposes only and does not constitute legal or tax advice. Consult a qualified real estate attorney for guidance on your specific transaction.