News & Issues: Policy Statements

Realty Transfer Tax

Background: A real estate transfer tax is a state and local tax assessed on real property when ownership of the property is exchanged between parties. All types of real property, including residential, commercial, and agricultural, are subject to the transfer tax. Although the tax is generally levied on the value of the property, it is assessed only on the sales transaction instead of on an annual basis like the general property tax. Transfer taxes may be assessed on either the buyer or the seller, but both are usually jointly and severely liable for the tax.

In many states, the realty transfer tax is used to fund programs designed to preserve open space in residential or commercial areas and to fund housing programs for low-incomes residents. Pennsylvania currently imposes a 1% tax, with an additional tax levied by school districts and municipalities. Generally speaking, the local transfer tax equals an additional 1%. For more information, read PAR's Fact Sheet: Stop Taxing the American Dream.

Recent Developments:

In June of 2007, the Pennsylvania General Assembly considered options to fund the Commonwealth's ailing mass transit systems. One prospective option would have increased the statewide realty transfer tax (RTT) from 1.0% to 1.9%, with the additional 0.9% dedicated to mass transit funding. Another option would have given county governments the authority to increase the local RTT and dedicate the additional percentage to mass transit. The final bill did not include a local option to increase the realty transfer tax. Thank you to all the REALTORS® who used the PAR Legislative Action Center to send a letter to your legislator.

PAR and Suburban REALTORS Alliance believe that the RTT makes housing less affordable for everyone, from first-time homebuyers struggling to put together a down payment to senior citizens having to give up a portion of their equity to taxes when they downsize to a smaller home. In addition, we believe that RTT is poor public policy, especially when used as a tool to fund mass transit. Quite simply, there is no relationship between mass transit and real estate transactions. Homebuyers and sellers should not have to carry the burden of funding mass transit. 

Suburban REALTORS Alliance Position: The Alliance is opposed to increases in the current transfer tax for the following reasons:

• As the transfer tax is levied only on buyers and sellers of property, the burden per taxpayer is greater than the burden from a more broad-based tax designed to generate the same amount of revenue.
• Since public transportation is a benefit that is open to all members of society, the charge should not be placed solely on buyers and sellers of property.
• The transfer tax adds additional burdens on first-time home buyers saving for a down-payment and covering the closing costs and runs contrary to existing federal, state, and local programs including the mortgage interest deduction, low interest property maintenance loans, and grants to first time homebuyers.
• Currently the Pennsylvania Realty Transfer Tax exceeds that of six neighboring states including Maryland, New Jersey, New York, Ohio, Virginia, and West Virginia.
• Pennsylvania has one of the highest transfer taxes in the nation. This distinction could contribute to the "brain-drain" effect and is not an attractive way to draw out-of-state homebuyers to the Commonwealth.
• The transfer tax is an unpredictable source of revenue due to fluctuating economic and housing market conditions.