Buying or selling in Plano and confused by the “tax escrow” lines on your closing paperwork? You are not alone. Property taxes and escrow accounts affect your cash to close and who pays what after you move in. In this guide, you’ll learn how Collin County tax prorations work, how lenders set up mortgage escrow accounts, and what to check on your Closing Disclosure. Let’s dive in.
Two escrows at Plano closings
There are two different escrows involved at closing. The title company’s closing escrow holds funds, pays off liens, and disburses money to the right parties when you sign. It may also handle paying property taxes due at closing. This is separate from your lender’s mortgage escrow account that collects monthly amounts for taxes and insurance and pays those bills when due. For a quick overview of the title company’s role, see this explanation of how a title/escrow agent handles funds and payoffs at closing from a national title resource (how title escrows work).
How Collin County taxes work
Collin County mails property tax statements in October for the calendar year. Taxes are payable without penalty until January 31 of the following year, and Texas property taxes are typically paid in arrears. These timing rules drive how title companies prorate taxes at Plano closings. You can review the county’s timing and payment details on the Collin County Tax Assessor page (property tax timing and due dates).
How title prorates taxes
Under the standard Texas residential contract, taxes for the current year are prorated through the closing date and then adjusted later if the actual bill differs. Local practice follows that contract language so each party pays their share for the part of the year they owned the home.
When the bill is unavailable
If your closing happens before tax bills are issued or finalized, title companies usually prorate using last year’s tax amount. After the new bill arrives, the parties adjust between themselves per the contract. This practical approach is outlined by a Texas title source (how prior-year prorations work) and by the standard TREC contract language (TREC proration clause).
When the bill is available
If the current year’s bill is out and due, the seller often pays the full bill at closing and receives a buyer credit for the buyer’s post-closing share. The exact flow appears on the settlement statement based on the contract and local custom.
What shows on your Closing Disclosure
Your Closing Disclosure lists tax prorations, any taxes paid at closing, and any initial escrow deposits your lender requires. It must also state whether an escrow account will be established. Review the Escrow Account table and Cash to Close sections carefully so you know what is collected upfront and what will be paid later (Closing Disclosure escrow requirements). Title will also order a tax search or tax certificate to confirm current and delinquent taxes, which guides what must be paid at closing (what a tax certificate shows).
Mortgage escrow accounts 101
A mortgage escrow (also called an impound account) is set up by your lender after closing to collect monthly amounts for property taxes and homeowners insurance. The lender then pays those bills when they are due.
Who requires escrows
FHA and USDA loans require escrow accounts. VA loans are not required by statute to escrow, but most lenders still require them. Conventional lenders may require escrow if risk is higher, such as with a smaller down payment. Always confirm your loan program’s rules with your lender (loan programs and escrow).
Cushion rules and statements
Federal rules limit the escrow cushion to no more than one-sixth of the estimated annual escrow payments, which equals two months of escrow. Servicers must give you an initial escrow analysis, provide annual escrow statements, and generally refund a surplus of 50 dollars or more after the annual analysis (RESPA escrow limits and analyses).
How much lenders collect
Your lender will perform an escrow analysis before closing to decide how much to collect to seed the account. As an illustration, if estimated annual taxes and insurance total 3,600 dollars, the monthly escrow is 300 dollars. The lender could collect up to a two-month cushion, about 600 dollars, plus any required prepayments such as the first year of insurance. The exact numbers depend on your closing date, due dates, and your lender’s analysis.
After closing: who pays taxes
The title company records your deed and ensures delinquent taxes, if any, are addressed from seller proceeds at closing. If your loan has an escrow account, your servicer will begin collecting the escrow portion with each mortgage payment and will pay tax and insurance bills when due. Watch for your servicer’s initial escrow statement and the annual escrow analysis.
Buyer checklist
- Review the Closing Disclosure for tax prorations, any taxes being paid at closing, and your initial escrow deposit.
- Ask your lender for the initial escrow analysis. Confirm the cushion and when the servicer will begin making payments.
- Understand whether the current year’s bill will be paid at closing or prorated using last year’s amount, with a later adjustment if needed.
Seller checklist
- Provide prior-year tax statements to title and confirm whether this year’s bill has been issued.
- Expect to see a prorated charge for your share of the year through the closing date and payoff of any delinquent taxes from proceeds.
- Be prepared to re-prorate with the buyer if the final bill differs from the amount used at closing, per the contract.
Quick example: seeding escrow
Imagine your Plano closing occurs in summer before the tax bills are mailed. Title prorates taxes using last year’s amount and the seller gives you a credit for their share through the closing date. Your lender also collects an initial escrow deposit that may include a two-month cushion and any needed prepayments so the account has enough to cover the tax bill when it comes due in January.
If you want a seasoned Dallas-native advisor to review your Plano closing numbers and keep the process smooth, connect with Debbie Ingram for clear, practical guidance.
FAQs
Who pays the property taxes at a Plano closing?
- Under the standard Texas contract, taxes are prorated through the closing date. The seller is charged for their share up to closing, and the buyer assumes the rest of the year. If the actual bill differs from the estimate used at closing, the parties adjust per the contract (TREC proration clause).
Will my lender pay my Plano property taxes after closing?
- Only if your loan has an escrow account and the servicer holds funds to pay them. FHA and USDA loans require escrows, and most VA lenders and many conventional lenders require them as a condition of the loan (loan programs and escrow).
How much will my lender collect for escrow at a Plano closing?
- The lender’s escrow analysis sets the amount. Federal rules allow a cushion up to one-sixth of annual escrowed items, and the exact deposit appears on your Closing Disclosure (RESPA escrow limits and analyses).
What if my escrow has a shortage or surplus later?
- Your servicer performs an annual escrow analysis. A surplus of 50 dollars or more is generally refunded, and a shortage can be repaid in a lump sum or spread over payments, depending on servicer options (RESPA escrow limits and analyses).
Do mortgage escrow accounts earn interest in Texas?
- Federal law does not require lenders to pay interest on escrow accounts, and Texas does not impose a general escrow-interest requirement. Confirm any interest arrangements with your lender or title company (escrow interest overview).
How do homestead exemptions affect Plano tax prorations?
- Exemptions that reduce the current year’s bill can impact prorations if known at closing. If an exemption changes after closing, you may need to re-prorate under the contract. New owners should ensure the appraisal district updates ownership and file any eligible exemption (TREC proration clause).
