The city just raised the transfer tax rate on real property. Already one of the highest in the country, the city is raising its share of the transfer tax from 3.1% to 3.278%. The state also charges 1%, so the overall transfer tax on the sale of real property is now 4.278%. Let me break all of this down in a few concise bullet points:
• The transfer tax is the tax that is charged when a property sells (i.e., transfers ownership, conveys). It is a one-time charge and is totally separate and distinct from the annual property tax that I so often write about.
• The custom in Philadelphia is that the buyer and seller split the transfer tax evenly. So the buyer and seller are now each responsible to pay 2.139%. This amount is added to (and makes up a substantial portion of) each party’s closing costs.
• So the previous rate was 2.05%. The increase to 2.139% is a 4.34% increase.
• On a $500,000 home, the transfer tax for each party will increase by $445 to $10,695.
• And the absolute craziest thing of all… the city just passed this ordinance and, with no warning, made it effective in a few days, that is for all closings that take place starting July 1st.
So if you are currently under contract on a property, then this law retroactively applies to you. I find this to be unconscionable on the city’s part. The higher rate is bad enough, but how about giving people some notice and start it 1/1/19 or something like that? My team has 19 closings in July that will be affected by this. Inexcusable on the city’s part not to provide any notice.
If you have any questions regarding the transfer tax, Philly taxes in general, or anything Philly real estate, please reach out.
And as always, do you know someone who is considering buying or selling real estate? I would be honored if you recommended me to be their trusted adviser. I pledge to provide them with the absolute highest level of service.