In Pennsylvania, transfer taxes are split between the buyer and seller, but due to varying county regulations, the specific rate can be a bit difficult to pin down (more on that later).
To have an easier time working out the specifics of your taxes and the negotiation as a whole, it’s best to have an experienced real estate agent lend you a hand — which is where Clever Real Estate comes in.
We can connect you with a local expert to help navigate your county’s regulations and ensure you don’t miss out on any taxes. On top of that, your Clever agent can handle the negotiations and work to tip them in your favor.
They might even be able to negotiate for the other party to shoulder some (or all!) of the transfer taxes required at closing.
However you slice it, Pennsylvania transfer taxes are confusing. Let's take a closer look at how Pennsylvania treats transfer taxes so you can get a better idea of what you might need to pay.
Who pays transfer taxes in Pennsylvania: the buyer or the seller?
According to the Pennsylvania Department of Revenue, both the seller and buyer are held jointly liable for the payment of transfer tax. What that means is that the two parties often split the cost equally between themselves.
In reality, however, the payment of transfer tax is often a matter of negotiation between the buyer and seller. In a seller's market, the seller may be able to get the buyer to pay the transfer tax in its entirety. Quite simply, it comes down to who has the leverage in that particular market.
A majority of the amount you pay in transfer tax as a buyer or seller in Pennsylvania is directed to the state's General Fund. 15% of the collections are contributed to the Keystone Recreation, Park & Conservation Fund. This is a fund dedicated to the creation and preservation of green spaces and recreational areas across the state of Pennsylvania.
How much are transfer taxes in Pennsylvania?
In Pennsylvania, transfer tax is split between the state, local municipality, and school district.
The tax percentage owed to the state is the same across Pennsylvania. One percent of the selling price of a home is directed to the state's Department of Revenue.
The tax imposed by the local government and school district varies from place to place. In Philadelphia, for example, 3.278% is paid to the city along with the 1% paid to the Commonwealth. Bellevue, in Allegheny County, charges 1.5% in transfer taxes.
The exact amount that you'll pay in transfer tax will depend on the county or city in which you're located. Unfortunately, regardless of where you are, you can’t lower or negotiate the total amount owed at closing.
However, if you want to save some money to offset the overall cost of the transfer tax, then Clever has a solution for you. We’ll partner you with a local agent that can negotiate a great deal with the other party.
On top of that, selling with a Clever agent only costs 1% in listing fees (compared to the average of 3% nationwide), and buying with one will get you up to 0.5% cash back. If you add all the savings up, you’re bound to recoup the cost of the transfer taxes.
Can you deduct transfer taxes?
The IRS makes it clear that transfer taxes cannot be deducted from your tax returns. What they can do, however, is to reduce your tax exposure when capital gains are calculated.
Let's say you pay a transfer tax when buying a home in Pennsylvania. When you sell that same home, you will have to pay a capital gains tax. That is tax paid on the amount by which the value of your home has appreciated.
Your capital gain is the difference between the selling price of the home and its cost basis. When determining the cost basis of your home, you can add your transfer tax to it. In that way, the transfer tax reduces the amount you will have to pay in capital gains tax while selling a home.
The same idea applies if you paid a transfer tax while selling your home. The amount that you paid can be deducted from the selling price, thus reducing your capital gains tax.
PA transfer tax exemptions
In Pennsylvania, there are a few different kinds of real estate transactions that are exempt from transfer taxes. Certain sales made to or by government organizations, between religious entities, and involving a nonprofit development agency don't require the payment of a transfer tax. You can also qualify for an exemption if you're inheriting property through intestate or testate succession.
Pennsylvania transfer tax summary
Pennsylvania transfer tax can be a bit complicated to pin down, which is why it’s important to have a local expert guide you through it.
Working with a real estate agent can help you figure out exactly what taxes you need to pay and how much. They can also be a valuable resource when negotiating with the other party, as they can shift the tax burden in your favor.
If you're looking for an experienced real estate agent near you, Clever can help. Clever Partner Agents are sourced from the country's top brokerages and have years of experience helping clients navigate the home buying process — including real estate tax laws.
What’s more, you can get exclusive discounts, such as only a 1% commission on listing fees or a 0.5% home buyer rebate.