- Official section
- National XI.C: Prorations and Transfer Fees
- Broker weight
- 7% of the national broker portion
- Expected scored items
- Real Estate Math accounts for about 7 of 100 items
Calculations topic guide
Prorations and transfer fees
Proration questions feel difficult when time, money, and debit-credit direction are handled at once. Separate those jobs. First identify the period, then calculate the share, and only then place the debit and credit.
Last updated: August 1, 2026
What calculation do you need to make?
Short answer: A proration is the full-period amount divided by the stated time base, multiplied by the number of chargeable units. An accrued item normally produces a seller debit and buyer credit for the seller's unpaid share. A prepaid item normally produces a seller credit and buyer debit for the buyer's future share. For Illinois transfer tax, divide taxable value by $500, round every fraction up, and apply each stated state, county, or local rate.
The PSI national outline effective June 24, 2026 expressly tests prorations and transfer fees. Illinois tax timing, contract terms, local ordinances, and closing practice can change a live transaction. On the exam, use the amount, day-count convention, ownership of closing day, tax factor, and paying party stated in the question. The current enacted Illinois state rate verified for this guide is $0.50 per $500 or fraction.
The PERIOD method for proration and transfer-fee questions
- Pin down the item. Identify whether the problem concerns tax, rent, dues, insurance, fuel, interest, a security deposit, or a transfer charge.
- Establish payment status. Decide whether the amount is accrued, prepaid, already collected, still unpaid, exempt, or simply a separate fee.
- Read the time rule. Record the full period, 360-day or calendar convention, leap-year status, and who owns the closing day.
- Identify the responsible span. Mark the seller's final day and the buyer's first day, then count only the party's chargeable units.
- Operate on the amount. Divide the full-period amount by the correct base and multiply by the chargeable days or months.
- Direct the entry. Label the debit and credit according to who paid, who benefited, or who will pay the obligation.
- For transfer charges, reset. Determine taxable consideration, divide by $500, round every fraction up, and apply state, county, and local factors separately.
- Review the result. Check scale, direction, time count, rounding, and whether the question asks for the adjustment, one party's cash, or total fees.
- Item
- Annual item, 365-day year
- Calculation
- Annual amount / 365 x days
- Usual settlement direction
- Depends on accrued or prepaid status
- Item
- Annual item, 360-day year
- Calculation
- Annual amount / 360 x days
- Usual settlement direction
- Depends on accrued or prepaid status
- Item
- Monthly item, 30-day month
- Calculation
- Monthly amount / 30 x days
- Usual settlement direction
- Depends on who collected or paid
- Item
- Accrued seller expense
- Calculation
- Daily rate x seller days
- Usual settlement direction
- Seller debit, buyer credit
- Item
- Prepaid buyer-period expense
- Calculation
- Daily rate x buyer days
- Usual settlement direction
- Seller credit, buyer debit
- Item
- Advance rent for buyer period
- Calculation
- Rent rate x buyer period
- Usual settlement direction
- Seller debit, buyer credit
- Item
- Illinois state transfer tax
- Calculation
- Ceiling(taxable value / $500) x $0.50
- Usual settlement direction
- Use stated paying party
- Item
- Illinois county layer
- Calculation
- Ceiling(taxable value / $500) x $0.25
- Usual settlement direction
- Only if applicable
- Item
- Combined state and county
- Calculation
- Units x $0.75
- Usual settlement direction
- Does not include municipal tax
Can you follow the calculation from facts to answer?
Prorate accrued Illinois property taxes
Scenario: Annual property taxes are estimated at $7,300. Closing is April 11 in a non-leap year. Use a 365-day year, and the buyer owns the closing day. The taxes are unpaid and will be paid by the buyer later.
- Seller days are January 1 through April 10: 31 + 28 + 31 + 10 = 100 days.
- Daily tax is $7,300 / 365 = $20. Seller share is $20 x 100 = $2,000.
Answer: Debit the seller $2,000 and credit the buyer $2,000 because the buyer will pay the bill that includes the seller's ownership period.
Reimburse a prepaid association charge
Scenario: The seller paid $1,200 of association dues for the entire calendar year. Closing is October 1, the buyer owns closing day, and the problem uses monthly proration.
- Monthly dues are $1,200 / 12 = $100.
- The buyer receives the benefit for October, November, and December, or three months. Reimbursement is $300.
Answer: Debit the buyer $300 and credit the seller $300 for the prepaid buyer-period benefit.
Allocate rent collected in advance
Scenario: A tenant paid $2,400 rent for a 30-day month. Closing occurs on day 19, and the buyer owns the closing day. The seller already collected the full month's rent.
- Daily rent is $2,400 / 30 = $80.
- The buyer owns days 19 through 30, which is 12 days. The buyer's rent share is $80 x 12 = $960.
Answer: Debit the seller $960 and credit the buyer $960. Handle any tenant security deposit as a separate liability transfer.
Calculate Illinois state and county transfer tax
Scenario: Net consideration subject to transfer tax is $412,250. The problem says both the $0.50 Illinois layer and $0.25 county layer apply, with no municipal tax.
- $412,250 / $500 = 824.5, so round up to 825 taxable units.
- State tax is 825 x $0.50 = $412.50. County tax is 825 x $0.25 = $206.25.
Answer: Total state and county transfer tax is $618.75. Do not round 824.5 down and do not add an unstated municipal charge.
Which math errors cost the most points?
- Trap
- Start counting days before deciding who owns closing day.
- Correction
- Mark the final seller day and first buyer day first, then count the relevant span.
- Trap
- Every proration creates a seller debit and buyer credit.
- Correction
- That direction fits many accrued seller expenses, but a transferable prepaid item usually reverses the entry.
- Trap
- Illinois property taxes are handled the same way in every contract.
- Correction
- IDOR describes a general approach, while the contract controls the actual allocation and may include an estimate or reproration provision.
- Trap
- Use 360 days whenever a question involves real estate.
- Correction
- Use 360 only when the question directs it or supplies a 30-day-month convention. Otherwise follow the stated calendar method.
- Trap
- A security deposit is rent collected by the seller.
- Correction
- A deposit is generally money held against a tenant obligation and must be accounted for separately from earned rent.
- Trap
- Round $500 transfer-tax units to the nearest whole number.
- Correction
- PTAX-203 requires rounding any fraction to the next highest whole unit.
- Trap
- Multiply the sale price by 0.50 percent for Illinois transfer tax.
- Correction
- The state rate is $0.50 per $500 or fraction, not 0.50 percent of the price.
- Trap
- State and county rates always produce the entire transfer charge.
- Correction
- A home-rule municipality may impose another transfer tax with its own rate, exemption rules, form, and paying party.
- Trap
- The person paying a transfer tax changes the taxable value.
- Correction
- Cost allocation and tax-base calculation are separate questions unless a specific rule says otherwise.
- Trap
- A pending bill changes the current exam answer.
- Correction
- Use enacted, effective law. As of August 1, 2026, the Illinois state statute still states $0.50 per $500 or fraction.
Can you solve these original problems?
These questions are original study items aligned to the published outline. They are not copied, recalled, or predicted PSI questions.
1. Annual property taxes are $5,840. Closing is March 2 in a non-leap year, the buyer owns closing day, and taxes are accrued. Using a 365-day year, what credit does the buyer receive for the seller's period?
- $944
- $960
- $976
- $1,440
Show answer and explanation
Answer: B
Seller owns 60 days: 31 in January and 29 through March 1 because February has 28 days. Daily tax is $5,840 / 365 = $16. The buyer credit and seller debit are $16 x 60 = $960.
2. The seller prepaid a $720 annual service plan that transfers with the property. Six months remain for the buyer. Which entry is correct?
- Seller debit and buyer credit for $360
- Buyer debit and seller credit for $360
- Buyer debit and seller credit for $720
- No entry because prepaid items cannot be prorated
Show answer and explanation
Answer: B
The buyer reimburses the seller for the unused half of the transferable prepaid benefit: $720 / 2 = $360.
3. Taxable consideration is $300,001. How many $500 Illinois transfer-tax units apply?
- 600
- 600.002
- 601
- 602
Show answer and explanation
Answer: C
$300,001 / $500 = 600.002, and PTAX-203 requires rounding to the next highest whole number, which is 601 units.
4. Taxable consideration is $250,000, and the question says the Illinois state and county layers apply. No municipal tax applies. What is the combined charge?
- $250
- $375
- $500
- $1,250
Show answer and explanation
Answer: B
$250,000 / $500 = 500 units. State tax is $250 and county tax is $125, for a $375 total.
5. A seller collected the full $3,000 rent for a 30-day month. The buyer owns days 21 through 30. What settlement adjustment transfers the buyer's share?
- Buyer debit and seller credit for $1,000
- Seller debit and buyer credit for $1,000
- Seller debit and buyer credit for $2,000
- No adjustment because the tenant already paid
Show answer and explanation
Answer: B
Daily rent is $100, and the buyer owns 10 days. The seller holds $1,000 of income attributable to the buyer's ownership period, so the seller is debited and buyer credited.
Which numbers and formulas are easy to confuse?
- Terms
- Accrued expense vs. prepaid expense
- Difference
- An accrued expense has been incurred but not yet paid. A prepaid expense has been paid before the benefit period is complete.
- Question cue
- Who benefited, who paid, and who will pay after closing?
- Terms
- Seller debit and buyer credit vs. seller credit and buyer debit
- Difference
- The first shifts funds from seller proceeds toward the buyer. The second requires the buyer to reimburse the seller.
- Question cue
- Unpaid seller share versus seller-paid buyer benefit.
- Terms
- 360-day method vs. calendar-day method
- Difference
- The 360-day method uses twelve 30-day months. The calendar method uses actual days and 365 or 366 days.
- Question cue
- Convenience convention versus actual calendar count.
- Terms
- Property-tax proration vs. tax escrow
- Difference
- A proration allocates a tax obligation between buyer and seller. A lender escrow collects borrower funds for future tax payments.
- Question cue
- Settlement between parties versus reserve held for the lender's payment process.
- Terms
- Rent proration vs. security-deposit transfer
- Difference
- Rent is income for an occupancy period. A security deposit remains a tenant liability and is not seller income merely because the seller holds it.
- Question cue
- Earned revenue versus money held for a tenant.
- Terms
- Taxable consideration vs. sale price
- Difference
- The sale price may be the starting figure, while PTAX-203 applies statutory adjustments to reach net consideration subject to transfer tax.
- Question cue
- Contract figure versus statutory tax base.
- Terms
- State transfer tax vs. county transfer tax
- Difference
- Illinois imposes the state layer at $0.50 per $500 or fraction. A county may impose a separate $0.25 layer under its authority.
- Question cue
- Calculate each layer, then add only applicable layers.
- Terms
- Transfer tax vs. recording fee
- Difference
- Transfer tax is based on taxable value. A recording fee pays for accepting and recording an instrument and may follow a fixed or document-based schedule.
- Question cue
- Value-based tax versus recorder service charge.
- Terms
- Exemption vs. allocation
- Difference
- An exemption removes a qualifying transfer from tax. Allocation merely determines which party pays a charge that remains due.
- Question cue
- No tax liability versus shifting an existing cost.
What does the outline expect you to calculate?
- Topic
- Purpose of a proration
- What to know
- Fair allocation, ownership period, benefit period, reimbursement, accrued expense, prepaid expense, collected income, unpaid income, settlement adjustment, buyer debit, buyer credit, seller debit, seller credit, and balanced entry
- Best exam move
- Ask who used the property or received the benefit during the period and who has paid or will pay the bill.
- Topic
- Accrued expenses
- What to know
- Property taxes paid later, mortgage interest owed, utilities billed after use, unpaid association charge, assessment, wages, service charge, seller obligation, future buyer payment, seller debit, and buyer credit
- Best exam move
- If the seller benefited before closing but the buyer will pay later, debit the seller and credit the buyer for the seller's share.
- Topic
- Prepaid expenses
- What to know
- Insurance premium, association dues, fuel, service contract, tax paid in advance, rent paid by owner, annual permit, future benefit, unused period, buyer reimbursement, seller credit, and buyer debit
- Best exam move
- If the seller paid for a period the buyer will enjoy after closing, debit the buyer and credit the seller for the unused share, assuming the item transfers.
- Topic
- Income adjustments
- What to know
- Rent paid in advance, rent in arrears, security deposits, prepaid parking, laundry income, percentage rent, late fees, tenant credit, buyer ownership, seller collection, assignment, and settlement agreement
- Best exam move
- Treat collected rent for the buyer's ownership period as seller-held buyer money, then transfer deposits separately from income.
- Topic
- Day-count conventions
- What to know
- 360-day year, twelve 30-day months, 365-day calendar year, 366-day leap year, actual days, annual rate, monthly rate, daily rate, inclusive count, exclusive count, through date, from date, and rounding
- Best exam move
- Write the denominator before counting days. Never blend a 30-day-month numerator with a 365-day denominator.
- Topic
- Closing-day ownership
- What to know
- Buyer owns closing day, seller owns closing day, possession date, funding date, recording date, contract direction, local convention, through closing, as of closing, before closing, after closing, and inclusive wording
- Best exam move
- Build a tiny timeline and mark the final seller day and first buyer day before counting.
- Topic
- Illinois property-tax proration
- What to know
- Taxes paid after the assessment period, outstanding bills, prior-year bill, current-year estimate, seller occupancy, buyer future payment, contract percentage, reproration, new construction, homestead exemption, accelerated billing, and county treasurer
- Best exam move
- Use the tax figure or estimating factor supplied, calculate the seller period, and normally place an unpaid seller share as seller debit and buyer credit.
- Topic
- Illinois state transfer tax
- What to know
- $0.50 per $500 or fraction, taxable consideration, full actual consideration, personal property deduction, simultaneous exchange, outstanding mortgage remaining subject, exempt transfer, PTAX-203, revenue stamps, county recorder, and recordation
- Best exam move
- Find the taxable base, divide by $500, round units up, and multiply by $0.50.
- Topic
- County and municipal transfer charges
- What to know
- County authority, $0.25 per $500 or fraction, home-rule municipality, separate declaration, local ordinance, city stamp, buyer-paid charge, seller-paid charge, exemption, rate lookup, county recorder, and proof of payment
- Best exam move
- Calculate every tax layer separately because a local rate or paying party may differ from the state layer.
- Topic
- Transfer-tax exemptions and deductions
- What to know
- Consideration under $100, government and qualifying organization transfer, deed securing debt, corrective deed, tax deed, release, partition, reorganization, simultaneous exchange, foreclosure-related deed, statutory exemption, personal property, and mortgage subject-to deduction
- Best exam move
- Use an exemption or deduction only when the facts satisfy the stated legal condition; a label alone is not enough.
- Topic
- Settlement placement
- What to know
- Summary of transactions, charge to buyer, charge to seller, credit to buyer, credit to seller, tax stamp, recording fee, title charge, payoff, rent, security deposit, tax proration, cash to close, and seller net
- Best exam move
- Keep the calculation and the ledger entry separate, then confirm one party's debit has the intended opposite-side effect.
- Topic
- Rounding and reasonableness
- What to know
- Dollar rounding, cent rounding, daily rate precision, intermediate rounding, final rounding, next-highest transfer-tax unit, approximate check, sign, scale, duplicate entry, missing period, and answer label
- Best exam move
- Carry enough precision through a proration, but always round transfer-tax units up when the value is not an exact $500 multiple.
How should you drill this calculation?
- Session
- 1. Learn payment-status direction
- Focus
- Accrued, prepaid, collected, unpaid, seller benefit, buyer benefit, future payment, reimbursement, debit, and credit
- Proof you are ready
- Classify thirty items by payment status and settlement direction without calculating.
- Session
- 2. Count time accurately
- Focus
- Closing day, inclusive and exclusive dates, 30-day month, 360-day year, actual days, leap year, seller period, and buyer period
- Proof you are ready
- Draw and solve twenty timelines with no more than one counting error.
- Session
- 3. Calculate core prorations
- Focus
- Annual-to-daily conversion, monthly-to-daily conversion, tax, dues, insurance, fuel, interest, rent, and final rounding
- Proof you are ready
- Complete fifteen mixed prorations at 90% accuracy.
- Session
- 4. Master Illinois tax timing
- Focus
- Outstanding property taxes, seller occupancy credit, buyer payment, prior bill, estimated bill, accelerated billing, contract factor, new construction, and reproration
- Proof you are ready
- Explain why a seller debit and buyer credit often appear even when no current bill is paid at closing.
- Session
- 5. Calculate transfer charges
- Focus
- Taxable consideration, $500 units, round up, $0.50 state factor, $0.25 county factor, municipal layer, exemption, PTAX-203, and allocation
- Proof you are ready
- Solve fifteen transfer-fee problems, including exact multiples and one-dollar-over cases.
- Session
- 6. Apply PERIOD under time pressure
- Focus
- Item, payment status, time rule, responsible span, rate, amount, debit-credit direction, tax layer, and reasonableness
- Proof you are ready
- Score at least 90% on fresh mixed proration and transfer-fee scenarios.
Do not count recognition as mastery. Close the notes and explain the rule, apply it to a new fact pattern, and identify why each distractor fails.
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Questions students ask about Prorations and Transfer Fees
What is a proration in real estate?
A proration divides an income or expense between buyer and seller according to the period each party owns or benefits from the property. The settlement entry reimburses the party who paid more than that party's share or gives funds to the party who will later pay an obligation attributable to the other party's ownership period.
How do you calculate a real estate proration?
Find the amount for the full period, calculate the daily or monthly rate using the method stated in the question, count the chargeable days or months, and multiply. Then decide who receives the credit and who receives the matching debit. Do not begin arithmetic until you know whether the item is accrued or prepaid and who owns the closing day.
Are Illinois property taxes paid in arrears?
Illinois closing problems generally treat real estate taxes as an accrued expense because the bill for an ownership period is commonly paid later. The Illinois Department of Revenue says an existing-home seller generally pays outstanding bills and gives the buyer a credit for the seller's preclosing ownership period, subject to the real estate contract. The buyer then pays bills due after closing.
Is the closing day charged to the buyer or seller?
There is no safe universal exam assumption. The contract, local practice, settlement instruction, or question determines who owns the closing day. If the problem says the buyer owns the day of closing, count through the day before closing for the seller. If it says the seller owns that day, include the closing date in the seller's period.
Should I use a 360-day or 365-day year for prorations?
Use the method stated in the problem. A statutory or banker's-year question may use 360 days and 30-day months. A calendar-year question uses the actual number of days, normally 365 and 366 in a leap year. If an exam item supplies a convention, that convention controls even when a local closing office might use another one.
What is the Illinois state real estate transfer-tax rate as of August 1, 2026?
The enacted state rate remains $0.50 for each $500 of taxable value or fraction of $500. Divide the net consideration subject to tax by $500, round up to the next whole unit, and multiply by $0.50. Proposed legislation is not a current rate change unless enacted and effective.
What is the Illinois county real estate transfer-tax rate?
Illinois law permits a county to impose $0.25 for each $500 of value or fraction, and the current PTAX-203 calculation line uses $0.25 for county tax stamps. Confirm that the county tax applies to the transaction. Home-rule county or municipal charges may add different local amounts.
Do you round an Illinois transfer-tax calculation up?
Yes. PTAX-203 instructs the preparer to divide net taxable consideration by $500 and round the result to the next highest whole number. That means even a small fraction creates another $500 unit. For example, $300,001 produces 601 units, not 600.
Who pays real estate transfer taxes in Illinois?
Do not turn a common custom into a universal rule. State law imposes the tax on the transfer, while contracts and local ordinances can determine allocation between the parties. Many exam questions treat a transfer charge as a seller debit, but the facts given in the question control, especially for a home-rule municipal tax.
Are these official PSI questions?
No. The practice questions are original and track the public Real Estate Math outline effective June 24, 2026 and Illinois primary sources reviewed through August 1, 2026.
Primary sources
- PSI Illinois Candidate Information Booklet dated June 24, 2026
- Illinois Department of Revenue property-tax closing guidance
- Illinois Department of Revenue FY 2026 Property Tax Study
- Illinois Department of Revenue real estate transfer-tax guidance
- Illinois Department of Revenue Form PTAX-203 revised October 2024
- Illinois Department of Revenue PTAX-203 instructions
- 35 ILCS 200/31-10, Illinois state transfer-tax rate
- 55 ILCS 5/5-1031, county real estate transfer-tax authority
- 35 ILCS 200/31-45, transfer-tax exemptions
The current official outline controls the tested scope. Statutes, regulations, and official agency materials control when a general study rule and a jurisdiction-specific rule differ.
Editorial status
Checked against primary sources
The Pass Illinois editorial team last checked this guide on August 1, 2026. Every practice question is an original study item, and the source links above let you verify the rules that support the lesson.