Buying in Old City and wondering how Philadelphia’s transfer tax will impact your closing costs? You’re not alone. This line item can add thousands to your cash-to-close or reduce a seller’s net proceeds, and it often becomes part of the negotiation. In this guide, you’ll learn exactly what the transfer tax is, how to estimate it, who typically pays, and how to use it strategically when you write or respond to an offer. Let’s dive in.
What the transfer tax covers
The real estate transfer tax is charged when a deed is recorded. It is calculated on the sale price and collected at closing. In Philadelphia, there are two layers that commonly apply to a residential sale: the statewide Pennsylvania realty transfer tax and the City of Philadelphia’s municipal transfer tax. The combined rate is applied as a single calculation at settlement.
Because rates and local rules can change, you should confirm the current combined Philadelphia rate with the City’s Revenue Department or your settlement attorney before you finalize a budget.
When it is paid and who handles it
You pay the transfer tax at closing based on what you and the other party agreed to in the purchase contract. The title company or closing attorney calculates the amount, collects it on the Closing Disclosure or HUD-1, and remits it when recording the deed. You will see a clear line item for the transfer tax on your closing paperwork, either on your side or the other party’s side based on the contract.
How to calculate your number
The math is simple:
- Transfer tax = Sale price × Combined transfer‑tax rate.
If the combined rate is R%, the tax is Sale price × (R/100). Since the exact rate should be verified before you commit to numbers, use this formula and plug in the confirmed rate from your settlement team.
Old City price bands: what you might pay
To help you plan, here are illustrative examples across four common Old City price points. These use three combined-rate scenarios to show the range of impact. Confirm your exact rate before budgeting.
Band A: $350,000
- R = 1.0% → $3,500
- R = 2.0% → $7,000
- R = 3.278% → $11,473
Band B: $650,000
- R = 1.0% → $6,500
- R = 2.0% → $13,000
- R = 3.278% → $21,307
Band C: $950,000
- R = 1.0% → $9,500
- R = 2.0% → $19,000
- R = 3.278% → $31,141
Band D: $1,600,000
- R = 1.0% → $16,000
- R = 2.0% → $32,000
- R = 3.278% → $52,448
These examples make the scale clear. On mid to upper price points, the transfer tax can be tens of thousands of dollars, so it deserves attention in your financial plan and your negotiation.
Who pays in Old City: negotiation options
Responsibility for the transfer tax is negotiable and set in the purchase agreement. Local practice varies by neighborhood, price point, and market conditions. In Old City, you will commonly see one of these approaches:
- Buyer pays 100%: Often used when buyers want a price concession elsewhere but keep the headline price intact.
- Seller pays 100%: More common in slower market segments or when sellers offer concessions to attract buyers.
- 50/50 split: A neutral compromise that keeps the contract clean and the list-to-sale price optics aligned.
- Hybrid credits: The seller may give a credit for part of the tax while the buyer covers the rest.
Ask your agent and the title company what is typical for your submarket and price band. Then decide which structure best supports your pricing and appraisal strategy.
How transfer tax affects your budget
The transfer tax flows through to your numbers differently depending on who pays. Here’s how to think about it.
- If you’re the buyer and you pay: Cash-to-close increases by the tax amount unless your lender allows it to be covered by seller credits or other concessions. Always ask your lender how this interacts with loan program limits.
- If you’re the seller and you pay: Net proceeds decrease by the tax amount, in addition to other closing costs and your mortgage payoff.
- If you split it: Each side is responsible for their portion, which smooths budgeting and can simplify appraisal positioning.
A few quick illustrations using R = 3.278% for impact:
- $650,000 purchase, 50/50 split: Total tax is $21,307. Each side pays $10,653.50 at closing.
- $950,000 purchase, buyer pays all at R = 2.0%: Buyer covers $19,000 at closing in addition to down payment and other costs.
- $350,000 sale, seller pays all at R = 1.0%: Seller’s net is reduced by $3,500.
Exemptions and special cases
Some transfers can be exempt or treated differently, but they require documentation and confirmation by the settlement attorney or taxing authority. Examples include certain intra-family transfers, transfers to or from qualifying nonprofits, transfers incident to divorce, or transfers ordered by a court or probate. If you think an exemption may apply, bring it up early so the paperwork can be reviewed and prepared before closing.
Other closing costs to expect
The transfer tax is one of several line items at closing. You will also see recording fees for the deed and any mortgage, title insurance premiums, lender fees, and possibly local municipal charges or assessments. Your Closing Disclosure will itemize all of these so you can review them in advance of signing.
A simple prep checklist
Use this quick workflow to stay organized from offer to closing:
- Confirm the current combined Philadelphia transfer‑tax rate with your settlement attorney or title company.
- Decide who pays the tax and put it clearly in the offer or counteroffer.
- Run the math with the formula: Sale price × confirmed rate.
- If you are financing, ask your lender how transfer tax interacts with allowable seller credits.
- If you suspect an exemption, alert the settlement team early and supply requested documents.
- Review the draft Closing Disclosure for accurate placement of the transfer tax on your side of the statement.
Ready to plan your closing
Old City buyers and sellers succeed when they plan the transfer tax up front and use it as a tool in negotiation. With a clear formula, realistic examples, and a contract that spells out who pays, you reduce surprises and keep your deal on track. If you want a precise estimate for your property and guidance on the best split for your strategy, our team can help coordinate with your lender and title company and manage the details from offer to recording.
Have questions about transfer tax on a specific Old City condo, loft, or rowhome? Connect with Reid Rosenthal to map your numbers and next steps.
FAQs
What is the Philadelphia real estate transfer tax?
- It is a tax charged when a deed is recorded, calculated on the sale price, and collected at closing by the settlement agent.
When is the transfer tax paid in an Old City purchase?
- It is paid at closing, shown on the Closing Disclosure or HUD-1, and remitted when the deed is recorded.
Who typically pays the transfer tax in Old City deals?
- It is negotiated in the contract; buyers, sellers, or both may pay, and a 50/50 split is a common compromise.
How do I estimate my transfer tax on a $650,000 condo?
- Multiply $650,000 by the confirmed combined rate. For example, at 3.278%, the tax would be about $21,307.
Can transfer tax be covered by seller credits if I’m financing?
- Sometimes, if your loan program allows it. Ask your lender about concession limits before you finalize your offer.
Are there exemptions to the transfer tax in Philadelphia?
- Certain transfers like qualifying intra-family, nonprofit, divorce-related, or court-ordered transfers may be exempt with proper documentation.
Where will the transfer tax appear on my closing paperwork?
- It will be a line item on the Closing Disclosure or HUD-1 on the side of the party responsible under the contract.
