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Philadelphia Real Estate Transfer Tax Exemptions: Save on Your Property Transfers

CEO Khai Intela
Are you planning to transfer property in Philadelphia? Don't forget about the transfer taxes that typically come with this transaction. As of October 1, 2018, the transfer tax in Philadelphia is 3.278%, with an additional...

Are you planning to transfer property in Philadelphia? Don't forget about the transfer taxes that typically come with this transaction. As of October 1, 2018, the transfer tax in Philadelphia is 3.278%, with an additional state tax of 1%, making the total transfer tax 4.278%. While this tax may seem like an added expense, there are several exemptions available that can help you avoid paying it. Let's explore some of the notable exemptions:

Family Members: Keep It in the Family

One of the most popular transfer tax exemptions is the intra-family exemption. This exemption applies to transfers between spouses, divorced couples as stated in the divorce decree, parents and children (or their spouses), siblings (or their spouses), and grandparents and grandchildren (or their spouses). It even extends to life partners who are members of a verified Life Partnership under applicable law. However, it's essential to note that the state exemptions do not cover transfers between life partners, so you may still be subject to the 1% state transfer tax. Also, remember that transfers between cousins or aunts/uncles to nieces/nephews are not exempt. To claim the intra-family exemption, you'll need to provide documentation verifying the relationship, such as a birth certificate or marriage license.

Additionally, if the property passes through a will or intestate succession, or if it's transferred for no or nominal consideration, it is exempt from the tax under Section 7 of the applicable Philadelphia Code. Moreover, transfers between family members of an ownership interest in a real estate company are also exempt.

Religious Organizations and Nonprofit Housing: Doing Good Has Its Benefits

If you're part of a religious organization or other nonprofit corporation, you may be eligible for a transfer tax exemption. Transfers between religious organizations or individuals/entities holding title for religious organizations are exempt, provided that the property hasn't been used for commercial purposes. Furthermore, transfers of interests in stock, proprietary leases, or occupancy agreements in cooperative housing corporations or not-for-profit organizations are also exempt.

Transfers to or from nonprofit housing corporations incorporated by Philadelphia officials for promoting low-cost housing development in the city are exempt too. To qualify for this exemption, the transfer must be to a nonprofit grantee or a low to moderate-income person. Additionally, Philadelphia exempts transfers to nonprofit housing organizations that intend to renovate the property and transfer it to an eligible transferee within three years.

Common Misconception: LLC Transfers

Contrary to popular belief, transferring property between yourself and your own LLC does not make it tax-exempt. Specific provisions in the Philadelphia Code must be identified to claim any exemptions. However, there might be some exceptions to this rule.

Recording Fee: Another Expense to Consider

Alongside the transfer tax, there are also city and state recording fees attached to most real estate documents. For example, the recording fee for a deed is $256.75. You can find the recording fees for other documents on the Department of Records' website.

Conclusion: Seek Expert Guidance

The Philadelphia transfer tax can significantly impact your real estate transactions. Familiarize yourself with the various transfer tax exemptions to potentially minimize costs. Our experienced team can help determine if your real estate transaction qualifies for an exemption and guide you through the necessary steps to create and record your deed. Contact our office at 267-423-4130 to learn more about how we can assist you.

Please note that the information provided in this article is for informational purposes only and should not be considered personal tax advice. For personalized advice tailored to your specific situation, please consult our professionals, ensuring compliance with the Internal Revenue Code.