Buying a home in Philadelphia? One closing cost that can surprise you is the real estate transfer tax. It is a percentage of the purchase price and it can be meaningfully higher in the city than in many nearby suburbs. Understanding how it works helps you budget with confidence and avoid last‑minute stress. In this guide, you’ll learn what the transfer tax is, who typically pays it, how it’s calculated, and how Philadelphia compares to surrounding counties. Let’s dive in.
What the transfer tax is
Pennsylvania charges a realty transfer tax on the transfer of real property. Many local governments add their own transfer tax, which means your total tax is the state portion plus any county or city portion that applies. In Philadelphia, the City imposes its own transfer tax that often makes the total higher than in nearby suburbs. Always verify the current rules with the City and state before you sign a contract.
For state rules and definitions, review the Pennsylvania Department of Revenue’s guidance on realty transfer tax. For city rules and current rates, check the City of Philadelphia Department of Revenue’s real estate transfer tax pages.
- See Pennsylvania state guidance at the Pennsylvania Department of Revenue’s realty transfer tax pages: state realty transfer tax overview.
- See City guidance at the Philadelphia Department of Revenue: Philadelphia real estate transfer tax.
How it is calculated
Taxable event and base
The tax applies when you transfer title or an interest in real property, such as a home sale or a deed transfer. It is calculated on the consideration paid, usually the purchase price, or another value measure under local rules. Some transfers are exempt, including certain transfers to government entities, some transfers between spouses or incident to divorce, and certain qualifying nonprofit transfers. Exemptions are narrow and typically require documentation at closing.
Who pays and when
The transfer tax is usually paid at settlement and the title company or closing agent collects and remits it. Who pays is a matter of local custom and contract negotiation. In Philadelphia, there is no single rule that the buyer always pays. Your purchase agreement and the final closing statement control how the cost is allocated.
Multiple jurisdictions
A single transaction may trigger multiple taxes at once, such as state plus city. Your settlement agent prepares the forms and pays each tax to the correct authority. You will see each transfer tax line item on your Closing Disclosure or settlement statement.
Philadelphia vs. suburbs
Philadelphia’s city tax often results in a higher combined transfer tax than you would see in many nearby suburbs. Outside the city, many counties rely on the base state tax plus a modest local add‑on, which can be noticeably lower. Since rates can change, confirm the current totals with the City of Philadelphia and the relevant county office if you are shopping outside the city.
Budget examples (illustrative)
These examples show how to do the math. Confirm current rates before you rely on any estimate.
Example A: Philadelphia city sale
- Purchase price: $300,000
- Assumed combined rate: 4.278% (illustrative)
- Transfer tax: 0.04278 × $300,000 = $12,834
- If split 50/50, buyer and seller each pay $6,417
Example B: Nearby suburban sale
- Purchase price: $300,000
- Assumed combined rate: 1.00% (illustrative)
- Transfer tax: 0.01 × $300,000 = $3,000
- If split 50/50, each pays $1,500
These figures highlight why buyers in Philadelphia should plan for a larger line item at closing than in many suburbs.
Exemptions and special cases
Common exemptions include transfers to government units, certain charitable transfers, transfers between spouses, and transfers incident to divorce. Some transfers into a revocable living trust may also be treated differently under local rules. If you expect an exemption, bring the required documentation to closing because exemptions are not automatic. Transactions involving corporations, LLCs, trusts, or complex restructurings can be treated differently, so request confirmation from your closing agent and consult the city or state revenue office as needed.
Not the same as other fees
Transfer tax is separate from other closing costs. Deed recording fees, title search costs, and title insurance premiums are different charges. If you are financing, mortgage recording and lender-related fees are also separate. Your settlement agent will list each item on your Closing Disclosure so you can see the difference.
Buyer checklist
Use this quick list to stay organized.
- Verify rates before you sign. For city property, check the Philadelphia real estate transfer tax. For state rules, see the PA realty transfer tax overview.
- Ask who pays what in your market and write it into your agreement of sale.
- Request an early estimated Closing Disclosure that shows the transfer tax line item.
- Gather any exemption documents you expect to use and share them with your title company in advance.
- If your deal involves a trust, LLC, corporate entity, or a nonstandard conveyance, ask your closing agent to confirm the correct tax treatment with the appropriate revenue office.
Get local guidance
You do not have to navigate transfer taxes alone. A local, full‑service team can coordinate with your title company, confirm current rules, and make sure your closing statement is accurate. If you are weighing city versus suburban options, we can help you compare estimated closing costs so you can buy with clarity.
Ready to plan your next move? Reach out to the Art Herling Team In Blue Bell for straight answers and a smooth, well‑coordinated closing.
FAQs
What is Pennsylvania’s realty transfer tax?
- It is a tax on the transfer of real property, calculated on the consideration paid, with a state portion plus any county or city portion that applies.
Who typically pays transfer tax in Philadelphia?
- Payment is set by local custom and your contract; buyers and sellers often split it, but you should confirm what your agreement states.
When is Philadelphia’s transfer tax due?
- It is collected at settlement and remitted by your settlement agent or title company to the appropriate authorities.
How do I estimate my Philadelphia transfer tax?
- Multiply the purchase price by the current combined rate for the city and state, and confirm the rate with the City of Philadelphia before budgeting.
Are there exemptions for certain transfers?
- Yes, some transfers like those between spouses, certain charitable transfers, and transfers incident to divorce may be exempt if documented at closing.
How is Philadelphia different from nearby suburbs?
- Philadelphia’s city tax often makes the combined rate higher than many suburban areas, so total transfer tax can be several times larger in the city.
