Key Takeaways
- In most land contracts, the buyer is responsible for paying property taxes, not the seller.
- The buyer gains equitable interest in the home and takes on ownership-like duties during the payment term.
- Taxes may be paid directly or through an escrow account, depending on the agreement.
- Missing tax payments can result in contract cancellation, tax liens, or loss of equity.
- Contract For Deed LLC structures land contracts with clear terms and offers support to help buyers meet their obligations.
Who Pays Property Taxes in a Land Contract?
A land contract, also known as a Contract for Deed, is a seller-financed agreement where the buyer makes installment payments directly to the seller instead of getting a loan from a bank.
The buyer gets possession of the home and takes on many of the responsibilities of ownership—but the seller holds the legal title until the contract is paid off in full.
This raises a common question for buyers: Who pays the property taxes in a land contract—the seller or the buyer?
Let’s break it down.
Who Is Responsible for Property Taxes in a Land Contract?
In most land contract agreements, the buyer is responsible for paying property taxes.
Even though the seller still technically owns the home during the contract term, the buyer:
- Lives in the home
- Uses the property as if it were theirs
- Agrees (in writing) to take on tax payments and other property-related costs
This is typically outlined clearly in the contract. If you’re working with a company like Contract For Deed LLC, these responsibilities are fully explained in your agreement before you sign.
Why Does the Buyer Pay the Taxes If They Don’t Hold the Deed?
It may seem odd to pay taxes on a home you don’t legally own yet—but in a land contract, you’re not a tenant. You’re a buyer in progress.
Here’s why the buyer usually pays:
- You have equitable interest in the property, meaning you’re treated like an owner for tax and maintenance purposes.
- You have full control and use of the property.
- The seller is only acting as a lender, not a landlord.
Paying the property taxes is part of stepping into the role of an owner, even before the deed is officially transferred.
What Happens If the Buyer Doesn’t Pay Property Taxes?
If the buyer fails to pay property taxes as agreed, several consequences can occur:
- Local government may place a tax lien on the property, which affects both the buyer and the seller.
- The seller may take legal action to cancel the land contract and reclaim the property.
- The buyer could lose all payments made and be evicted.
To avoid these risks, many land contract providers—including Contract For Deed LLC—strongly advise or even require setting up an escrow account to ensure taxes and insurance are paid on time.
Are Property Taxes Paid Directly or Through Escrow?
It depends on the agreement.
Two common methods:
- Buyer Pays Taxes Directly
- The buyer receives the property tax bill and pays it straight to the county.
- The seller may request proof of payment each year.
- Escrow Account Arrangement
- The buyer pays a monthly amount to cover taxes and insurance.
- The seller or a servicing company uses that account to pay the tax bill when due.
- This offers more protection for both parties and ensures timely payment.
At Contract For Deed LLC, we can help structure your agreement to include escrow if desired, for added peace of mind.
What About Insurance and Repairs?
In addition to taxes, the buyer is usually responsible for:
- Homeowner’s insurance
- Repairs and maintenance
- Utilities and HOA dues (if applicable)
Think of it this way: in a land contract, you’re taking on full homeowner duties, even if the deed hasn’t been transferred yet.
That’s why understanding the contract terms—and working with a reputable company—is crucial.
What Do Sellers Still Pay During the Contract Term?
Typically, the seller doesn’t pay much beyond the administrative side. However, some sellers may:
- Continue to pay taxes if the buyer fails to do so (to protect the property), then seek reimbursement or cancel the agreement.
- Maintain property insurance until the buyer provides proof of their own policy.
- Handle mortgage payments if they still owe money on the home—though this depends on the deal structure.
But in most standard land contracts, the financial responsibilities fall on the buyer.
How Contract For Deed LLC Handles Property Taxes
At Contract For Deed LLC, our land contract agreements are written clearly and legally to protect both parties. We ensure buyers understand their property tax responsibilities from day one.
We:
- Provide full transparency in the contract
- Offer escrow options for taxes and insurance
- Help buyers understand deadlines and obligations
- Assist in communication with county offices if needed
This approach avoids confusion and helps keep buyers on the path to full homeownership.
Mapping Where We’ve Made a Difference with a Wisconsin Land Contract or Minnesota Contract For Deed
Let us help you get into your home today!
Can You Deduct Property Taxes on Your Taxes?
In many cases, yes—as the buyer, you may be able to deduct property tax payments even if the deed is not in your name yet.
According to the IRS, if you are contractually responsible for the taxes and actually pay them, you may qualify for the deduction. Always consult with a tax advisor to confirm based on your unique situation.
Take the Next Step With a Trusted Land Contract Provider
Buying a home through a land contract should be straightforward and secure. At Contract For Deed LLC, we make sure our buyers know exactly what’s expected—including property tax responsibilities.
If you’re ready to own a home in Minnesota with no credit check and flexible terms, contact our team today.
Contact us now to get started.
