Do you have to pay real estate transfer tax in Philadelphia? If you’re dealing with commercial real estate, residential real estate or real estate development in Philadelphia the price could get steep. Here’s what you need to know.
In Pennsylvania, there is a real estate transfer tax imposed by the state as well as the county in which the property is located. Pennsylvania imposes a 1% transfer tax on the value of the real estate being transferred, while Philadelphia imposes a 3.278% tax on the value of the real estate being transferred. Philadelphia’s transfer tax is one of the highest rates within Pennsylvania. For comparison, Montgomery County, Pennsylvania's transfer tax is only 1%.
Sale of Property isn't the only transfer tax. When it comes to real estate transfer tax aka realty transfer tax, most people only think of the sale of property in exchange for money. However, that is only one type of transfer on which the tax is imposed. In fact, real estate transfer tax can apply to other transactions that involve the change in ownership of real estate by deed or other document, including long term leases.
While Pennsylvania and Philadelphia provide exemptions from transfer taxes depending on the purpose/type of transaction and the parties involved, the law may vary between Pennsylvania and the county. There may be transactions that are excluded from Pennsylvania realty transfer tax that are not excluded from Philadelphia's tax and other counties.
Although the government is excluded from transfer taxes, you may not be. Both Pennsylvania and Philadelphia transfer tax law excludes the federal, state or local government or its agencies from tax for all transactions. However, if the party to whom the property is being transferred is not an excluded party, that party may in fact be responsible for transfer tax if the transaction itself is not excluded. These may include properties purchased at a judicial/sheriff’s sale or from a state or local government agency.
In addition to transfers to/from the federal, state or local government or its agencies, both Pennsylvania and Philadelphia tax law exclude certain transactions from transfer tax. These may include deeds of correction or confirmation, transactions between certain family members, non-profits, corporations, and trusts.
For now, it is important to understand that transfer taxes exist in residential and commercial property transactions and that you may need to consult with a real estate lawyer to protect your interests.
The information above is general: we recommend that you consult an attorney regarding your specific circumstances. The content of this information is not meant to be considered as legal advice or a substitute for legal representation.