What is Transfer Tax?

Transfer tax is a state-imposed tax on the transfer of real property from one party to another. This tax is typically calculated based on the property’s sale price or assessed value and is collected by the state or local government. In Pennsylvania, the transfer tax is a significant component of the overall costs associated with buying or selling real estate.

Pro – Explanation:  Transfer tax in PA is typically 2% of the sale price of a property. It is commonly split between buyer and seller, but is negotiable within the PA Agreement of Sale for real estate.

The state transfer tax rate is 1%, and local municipalities typically impose an additional 1%, making the total transfer tax rate 2%.  By default, this transfer tax is split evenly between the buyer and seller unless otherwise specified on the agreement of sale. 

Watch out! A few areas in Pennsylvania charge more than 2%. Philadelphia and Reading are two specific examples.

Certain transactions may be exempt from transfer tax, such as transfers between family members or transfers involving certain types of entities. It’s essential to be aware of any exemptions that may apply to your particular situation.

Capstone Land Transfer offers a Deed Transfer service for simple real estate title transfers in PA.  Part of this service includes verifying transfer tax exemptions in situations where a family member is added or taken from a deed.  

Examples of transfer tax exempt deed transfers include;

• Adding a spouse to a deed in PA
• Removing a spouse from a deed after a divorce
• Adding a child to a deed or title in PA
• Selling a house to a child or grand-child in PA 

Understanding transfer tax is essential for both buyers and sellers. Being informed about the rates, who bears the cost, and any potential exemptions can contribute to a smoother transaction process. As a significant financial component, transfer tax underscores the importance of careful planning and negotiation in real estate dealings in Pennsylvania. 

Capstone Land Transfer can provide solid advice and exact price quotes on transfer tax for any real estate closing in PA as well as performing Deed Transfers or real estate Title Transfers.