It’s hardly shocking that 86% of home buyers choose previously owned houses over new ones.
So in case, you’re wondering, “Who will buy my house in Pennsylvania?”, then this statistic should put your mind to rest.
While the stages required in selling a property are similar regardless of where you reside, Pennsylvania’s state and municipal real estate laws and practices are distinct in certain ways. Getting acquainted with these early on will help you prevent complications later on.
Before you sell your home, you should familiarize yourself with certain crucial Pennsylvania property tax laws and your tax rights. Continue reading this article to learn about Pennsylvania property tax laws before selling your house and know some of your tax rights.
Pennsylvania Property Tax Laws
Your house is subject to municipal property taxes whether you live in Philadelphia, Pittsburgh, or any other Pennsylvania city. As a property owner, you want to make sure you’re not overpaying.
Taxes are a necessary trade-off that allows the state to deliver important services while also maintaining order. While federal tax rates are uniform across the board, state real estate taxes are a different matter. In addition to income state taxes, everyone who owns real estate is liable to state real estate taxes.
If you have a residential property or personal property in Pennsylvania, you must pay property taxes on it. Even if the property was left to you by an estate or you own a rental property, you must still pay real estate taxes.
In Pennsylvania, there is no maximum or minimum amount you must pay in property taxes. whether your home valuation is $40,000 or $4,000,000, you will incur property taxes. The size, location, and amenities of the property all have an impact on its market value. Different counties have different procedures for calculating a property’s value.
In addition, the assessor considers recent sales of comparable homes. Whereas in certain locations, the current market value of a property and its land is considered. Other locations utilize an older valuation, such as the property’s worth five or 10 years ago.
Despite the fact that local governments in Pennsylvania rely on income tax revenue four times more than the national average, income taxes account for just 8% of local general revenue. Pennsylvania is significantly more reliant on state support and property tax (figure PA-1 below).
Pennsylvania’s real property tax system is extremely decentralized, with considerable differences in due dates and processes across the various taxing agencies. 2014 (CCH State Tax Law Editors).
Assessment is the responsibility of Pennsylvania’s 67 counties, with assessment percentages varied by county. Counties also differ in their assessment cycles, and they can use either market value or a base year to determine assessed values.
Property tax assessment quality has long been a source of concern in Pennsylvania. In a 2014 evaluation, the International Property Tax Institute and the Council on State Taxation gave Pennsylvania the lowest grade among U.S. states for administrative processes. (Nicely et al. 2014).
If you bought your home in the middle of the year, your realtor or real estate agent may be able to arrange for you and the seller to share the expense of property taxes for the remainder of the calendar year. If this is the case, your mortgage interest statement will show it.
In the event you want to sell your house, you need to understand the tax consequence when selling a house.
Philadelphia Tax Laws
The City of Philadelphia assesses and collects property taxes on behalf of the Philadelphia School District.
Your tax funds support education, libraries, judicial systems, police and fire protection, public health care, roadways and drainage, disabled and senior citizen programs, and a variety of other services.
Property tax measures are based on the property’s worth.
In general, all property is taxed unless exempted by federal or state legislation. Land, structures, mobile homes, and houses are all examples of property.
Real estate taxes are only required once a year—on 31st March of each year. If taxes are still not paid by 31st March of the tax year, a penalty charge known as “additions” will be imposed on the principal amount of the tax, subject to a maximum rate of 15% of the principal amount payable.
The city canceled the early-pay discount option for the tax year 2021, claiming a substantial budget gap due to the pandemic, with forecasts of boosting income by around $6 million.
If the taxes are not paid by the end of the fiscal year, the 15% penalty is added to the principal, and tax liens are issued against the property. Penalties, interest, and lawyers’ fees continue to accrue until the tax is paid in full.
If a taxpayer fails to make arrangements to pay his or her taxes on time, he or she may be sued. Court fees are exorbitant. A property owner may be liable not just for taxes, interest, and penalties, but also for various foreclosure-related fees such as:
- Sheriff’s fees
- Abstractor/title work fees
- Property inspection costs
- Publication or advertising fees
- Court filing fees
- Deed recording fees
- Attorneys’ fees
- Service of process fees
- Environmental assessment fees
There are payment options available. If you meet the criteria established by the City of Philadelphia, your eligibility may be for an “Owner-Occupied Payment Agreement.” Applications are accessible on the Revenue Department’s website at www.phila.gov/revenue. You may also request an application in person or over the phone using the contact information provided.
Pennsylvania Property Tax Bill Relief
Based on Special Session Act 1 of 2006, Pennsylvania will continue to provide broad-based property tax reductions in 2021-22. The Commonwealth’s Budget Secretary confirmed on April 15, 2021, the $621.3 million in government-funded local tax relief will be attainable in 2021-22, as required by law.
When paired with the Rent Rebate program/senior citizen property tax, the total amount of state-funded property tax relief for next year will be $735.5 million.
After calculating its 2021-22 real estate tax rate, each school district will calculate the exact amount of property tax reduction for each farmstead and homestead.
This law reduces the financial burden of house ownership by allowing school districts to use gaming money to lessen property taxes for homeowners, particularly older citizens. It is expected that gaming would eventually produce $1 billion per year for municipal property tax relief.
Property tax relief and incentive schemes are available in Pennsylvania. The Homestead (or Farmstead) Exemption Program gives owners of qualified homestead or farmstead properties property tax relief by exempting a part of the assessed value of owner-occupied properties.
The exclusion amount cannot be more than 50% of the median value of all homestead properties within the taxable jurisdiction. The Property Tax/Rent Rebate Program provides tax breaks to eligible Pennsylvanians aged 65 and up, widows and widowers aged 50 and up, and individuals with disabilities aged 18 and over.
The Commonwealth of Pennsylvania also provides a Disabled Veterans Real Estate Tax Exemption, which exempts a veteran’s house from real estate tax if the veteran has a service-connected disability.
This program has an annual income restriction of $35,000 for homeowners and $15,000 for renters. The program offers a minimum payout of up to $650, while extra incentives for qualified households can increase total rewards to $975.
Other schemes to support economic growth have been established. In selected regions, the Keystone Opportunity Zones Program enables abatements or exemptions from some state and local taxes, including local property tax, sales tax, and other taxes.
The program’s goal is to revitalize economically challenged urban and rural communities. The Tax Increment Financing Guarantee Program intends to boost economic growth by utilizing tax increment financing.
Who Is Responsible for Setting Taxes?
The state’s constitutional right to tax is derived from Article VIII of the state constitution. The majority of Pennsylvania’s tax revenue is generated by the imposition of specific sales taxes, a general sales tax, and a personal state income tax.
Tax policies differ from one state to the next. States collect taxes to support a number of state government functions. Tax receipts account for around 40% of overall state income.
The remainder is derived from non-tax sources such as intergovernmental aid, lottery income, and fees. Personal income tax, corporate income tax, general sales tax, and excise (or special sales) taxes are the most common forms of taxes collected by state governments.
Pennsylvania is divided into 67 counties. Local state government authorities set both real estate tax rates and home values. The criteria for exemption from property taxes are set down in the Pennsylvania Constitution, and the General Assembly has established legislation and regulations to execute the constitutional requirements.
What Are Your Tax Rights?
The Taxpayers’ Bill of Rights in Pennsylvania assures justice and fairness in tax administration and enforcement. The Taxpayers’ Bill of Rights establishes uniform and consistent processes to ensure that the Department of Revenue handles all taxpayers fairly and equally.
The department invites taxpayers to read Your Rights as a Taxpayer, a department publication, to understand the department’s obligations and the rights to which they are entitled. Some of these rights include:
- The Right to Be Informed
Taxpayers have the right to know and to receive clear and simple information from the department.
- The Right to Quality Service
Taxpayers have the right to be assisted in a timely, polite, and professional manner. If you ever get the impression that you are not receiving this level of service, please share your thoughts using the customer service feedback survey.
- The Right to Retain Representation
Taxpayers have the right to be represented by an authorized agent, such as an attorney or CPA. REV-677 – Power of Attorney and Declaration of Representative
- The Right to Confidentiality
Taxpayers have all the right to have his\her tax returns and other personal information kept secure and private. Unless permitted by the taxpayer or required by law, the department will not share taxpayer information.
- The Right to Question the Department’s Position and Have Your Say
Any of the department’s assessments can be challenged by taxpayers. A taxpayer must submit a petition with the Board of Appeals to contest an assessment or certain agency decisions.
Please refer to your notification for your individual appeal timeframe. Taxpayers can also obtain a refund if they do so within the time constraints specified by law. A taxpayer must also submit a petition with the Board of Appeals in order to receive a refund.
The PA property tax rates vary from county to county. Local governments around the state employ a variety of approaches to determine your real property tax base.
You may be aware that the Pennsylvania taxation authorities calculate your real estate taxes by multiplying the taxable value of your house by the tax rate.
Pennsylvania’s overall real estate tax rate is higher than the national average. Pennsylvania’s average effective property tax rate is 1.58%, in comparison to the national average of 1.08 %.
Although there is some fluctuation, an acceptable general estimate of a home’s assessed value for real estate tax purposes is between 80% and 90% of its market value.
There are a number of things to do before selling a house, including pricing it correctly, making the property more appealing, decluttering, and having a home inspection performed.
It is critical to understand how the property tax is determined and the correct amount; otherwise, you may be paying excessively, less, or not at all. In addition, if you itemize your taxes, you can claim a federal real estate tax deduction. However, determining how much the deductions are, who gets it, and when can be difficult.
Look no further than Problem Property Pals for more assistance with your Pennsylvania property tax problems. We’ll connect you with a tax expert who specializes in your state. You can have your property taxes done by a genuine tax professional without having to visit an office.
We are a reputable home-buying firm with offices in Pennsylvania and Florida that has completed hundreds of real estate transactions since 2017. We buy houses in Philadelphia, Pennsylvania, and Florida. Feel free to contact us today to see how we can help you!