There are many costs associated with the transfer of real property from one party to another. One of these costs is real estate transfer tax. Understanding Pennsylvania transfer taxes can help you make the right decision for you.
Want a real estate expert you can count on? Contact Mooney & Associates today.
What are Pennsylvania Transfer Taxes?
Relative to the counties where Mooney and Associates practices, this is a one-time tax which equates to 2% of the value of the property. So if a property is being sold for $100,000.00, the tax on this transaction will be $2,000.00. This is split equally between the state and the school district where the property is located.
Sometimes property is sold for much lower than its fair market value. In fact, savvy investors will even list a sales price on a deed as being $1.00 (for a number of reasons). This does not save the parties from having to pay the real estate transfer tax. Attached to the deed will be a Pennsylvania Revenue Form 183, a Realty Transfer Tax Statement of Value form.
On this form you must set out the assessed value of the property multiplied by the county’s common level ratio (a percentage determined by the county to catch up a property’s assessed value to the property’s “current value”), which captures this tax. Generally speaking, this tax is shared by both parties of a transaction. If this is not the case for your transaction, then you should question your realtor as to the exact reason why. In our example above, the seller and the buyer would each split the $2000.00 tax bill, each paying $1,000.00.
Transfer Tax Exceptions
There are a number of exceptions to this tax. Some of the more common exceptions include transferring property from one spouse to another or from parents to children, and vice versa. One exception that does not apply is transferring from an individual to a corporation/limited liability company that is owned by the same individual.
Many people purchase investment properties and place them in their own name. Eventually they learn of the benefits of holding this property in a separate corporate entity and seek to effectuate this transfer. This can create a substantial tax burden, one which could have been avoided if they had thought of doing the entity contemporaneous with the purchase of the property.
Count on Mooney
If you are purchasing property, don’t risk a large purchase like that to just anyone. We have a vast amount of experience in real estate law. Tell your realtor that you want to use Mooney & Associates for the settlement of your real estate purchase.
Mooney & Associates has 15 offices throughout Central Pennsylvania including:
We can meet you and conduct your home purchase settlement at a location more convenient for you. No matter what, you know you can Count on Mooney. Contact us today for a consultation or call us at 717-632-4656 or toll free at 877-632-4656.