Philadelphia Transfer Tax Part II : The Family Exemptions

This is a continuation of the blog post from June 22nd, which you can read about here. In that post, I highlighted how the Pennsylvania transfer tax system works generally, and how the taxes in certain counties (like Philadelphia) are substantially higher than those in other counties. I outlined the math one uses in calculating the transfer tax. My intent was to be informative, and there was no good news in that blog.  

Today’s post (and subsequent posts will) focus on exemptions to the Pennsylvania transfer tax. When we say exemption, what we mean is, there are certain times when recording the transfer of a property from one party to another does NOT trigger the need to pay either the city or the county transfer tax. You are granted an exemption.  

These exemptions are outlined in The Pennsylvania Code, Section 91.193, entitled Excluded Transactions. Exemptions exist in a few basic categories: Family, Estates, Business, and other. I am not going to be able to cover them all, but the ones I cover will constitute the vast majority of the ones that I see. And for today’s post I am going to explain the Family Exemptions.

Family Exemptions

Pennsylvania Code section 91.193(b)(6) is all about transferring property to family members, and is by far the most common exemption a real estate attorney like myself comes across on the day-to-day. The following transfers are excluded from the tax:  

Between:
A husband and a wife (even if parties are now divorced, as long as the property wasn’t obtained after the marriage ended);
Or, between “lineal descendants” (defined as parents, grandparents, or great-grandparents, not cousins or aunts);
Or, between siblings (from the same parent, one parent in common is good enough).

For these types of transactions, you will need to prove that there is a familial relationship between yourself and the transferee. This seems easy enough, right? However, you would be surprised to learn how difficult it can be.  

Picture this: a mom wants to transfer a property to her daughter. He daughter is married. The mom is divorced and has taken back her maiden name. So the parties do not have the same last name. What we now have to bring to the recorder of deeds is proof connecting the names of the parties. Namely: The mom’s marriage license (showing she took the daughter’s maiden name when she was married), the mom’s divorce decree, showing she took back her maiden name, the mom’s license (showing she is who she says she is), the daughter’s birth certificate, showing she was born to the mother, the daughter’s marriage license (showing she took her husband’s last name) and the daughter’s license, showing she is who she says she is.  

Every recorder of deeds is different, but they are under an obligation to be convinced that the family members are actually lineal descendants. In rural counties, this is sometimes very easy, because everybody knows everybody. In a big city like Philadelphia, it can be very onerous. So, when you plan on doing this, it is best to start rounding up your documents early, and don’t assume the recorder of deeds knows anything about your family.  

Next week, I am going to explain the Estate Exemptions, and touch on some random exemptions. The business exemptions will be the subject of their own post.

As always, if you have any questions about real estate in Pennsylvania or New Jersey, especially in Philadelphia and surrounding counties, contact me at [email protected]. Console Legal is here for you!