Understanding Pennsylvania’s Transfer Tax: A Quick Guide
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Joseph Gordon Associate EditorJoseph Gordon is an Associate Editor with HomeLight. He has seven years of experience reporting on the commercial real estate and insurance industries. He holds an MFA in Creative Writing from the University of San Francisco.
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If you’re planning to sell your home in Pennsylvania, you need to have a full understanding of all of the financial implications, including real estate transfer taxes.
Transfer taxes are fees imposed by local, state, or county governments when transferring property ownership between people or entities. These taxes can significantly impact the total cost of selling your property in Pennsylvania.
Our guide will explore how transfer taxes work in Pennsylvania, outlining the various types and what sellers should anticipate paying.
Whether you’re a first-time seller or a seasoned homeowner, this guide will provide you with essential insights to manage the complexities of transfer taxes efficiently, ensuring you are well-prepared for your home sale.
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Disclaimer: This post is for educational purposes only and does not constitute legal or financial advice. Links and mentions of Pennsylvania area tax services or attorneys should not be considered endorsements.
What are transfer taxes?
Real estate transfer taxes are levied by state or local governments when the ownership of a property is transferred from one individual to another. According to the Federal Trade Commission, this tax is applicable whenever the title of a property—essentially the official rights to ownership—changes hands.
The specific amount owed in transfer taxes can vary greatly depending on the location of the property, as each state, county, and city may have its own regulations and rates for these taxes.
These taxes can be invaluable in local and state economies, as they help generate revenue that funds various public services, though the exact impact they will have on your bottom line depend greatly on your location, the amount the property sells for, and other factors.
Who pays for transfer taxes?
Both the buyer and sellers (or grantor and grantee) are responsible individually for real estate transfer taxes in Pennsylvania.
What are the types of transfer taxes?
Transfer taxes will typically vary based on local guidelines but can generally be broken down into three categories — state, city, and county, depending on the state. Here’s a quick look at how it works in Pennsylvania.
Pennsylvania levies its real estate transfer tax at a rate of 1 percent on the value of real estate (including contracted-for improvements to property) transferred by deed, instrument, long-term lease, or other writing.
State transfer taxes
Pennsylvania realty transfer tax is collected, often along with an additional local realty transfer tax, by county Recorders of Deeds. The Recorders of Deeds remit the commonwealth’s 1 percent to the Department of Revenue, and the locals have the option to share their realty transfer tax among school districts and municipalities.
Visit the PA Department of Revenue’s Realty Transfer Tax Forms page to access the Realty Transfer Tax Statement of Value forms from the state.
County transfer taxes
For Bucks County, there is a Transfer Tax of 2% (1% to the state and 1% to the municipality and school district) for all property sales in Pennsylvania on the value of the property or interest being conveyed. This value is not necessarily the sales price. The 2% Transfer Tax is paid at the time of recording.
City transfer taxes
The current rates for the Realty Transfer Tax in Philadelphia are calculated at 4.278% of the property’s sale price or assessed value, along with any assumed debt. If there is no sale price, the tax is calculated using a formula based on the property value determined by the Office of Property Assessment (OPA).
Other transfer fees
In addition to transfer taxes, there are possible fees to consider, such as from a homeowner’s association or another local neighborhood organization. Again, as these can vary heavily based on location, it’s important to consult a professional.
If you’re selling your home for sale by owner, consulting a professional might help with some of the finer points of the process and give you a better idea of what you can expect.
Transfer tax exemptions
In Pennsylvania, transfer tax exemptions may apply that can significantly reduce the financial burden on property transactions.
Depending on the specific circumstances and location within the state, some sellers might be eligible for these exemptions. Here’s a breakdown of scenarios where real estate transfers may not incur a realty transfer tax:
- Transfers among family members, including both gifts and sales of property.
- Transfers to governmental units or between religious organizations.
- Transfers to shareholders or partners, as well as to and from nonprofit industrial development agencies.
- Deeds to burial sites.
- Certain transfers that involve ownership changes in real estate companies and farms.
- Property passed through testate (with a will) or intestate (without a will) succession.
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