Over the years, the state of Pennsylvania has become an increasingly popular destination for many retirees. Regarded as the “Keystone State”, this dynamic place is starting to generate interest among several motivated real estate investors and home buyers, causing a significant shift in the state’s housing market. Aside from its stunning landscapes, diverse mix of arts and culture, numerous historical landmarks, and countless outdoor recreation opportunities, Pennsylvania offers its residents a variety of living situation options at every price point. Potential homeowners of this beautiful state can choose the lifestyle they want to have without compromising their finances.
The growth of Pennsylvania can also be credited to the state’s tax rates. Not only is it tax-friendly to its retirees, but Pennsylvania also provides its citizens with relatively inexpensive living conditions compared to its neighboring states. Even if Pennsylvania’s property tax rates are notably higher than the national average, several home buyers are still actively searching for a place they can call home in this vibrant state.
Aside from knowing why Pennsylvania is a gem to its residents, potential property owners should also be aware of the state’s tax landscape. They should be familiar with the different Pennsylvania property tax exemptions, property tax laws, how the tax bill is calculated, and other essential tax rules and regulations. If you are considering relocating to Pennsylvania or planning to sell your property, this article can help you better understand the tax fundamentals of the state, specifically on Pennsylvania’s property tax laws and real estate property tax exemptions.
An Overview of Pennsylvania Property Taxes
One of the biggest perks of living in Pennsylvania is its reasonable housing. There is no shortage of affordable cities and counties to settle in the keystone state. On average, living in Pennsylvania is less expensive than in other places in the country. If you are looking to purchase a property, It is important to note that the property tax rates in Pennsylvania exceed the national averages. The state’s average effective property tax rate is 1.50%, which is relatively higher in comparison to the national average of 1.07%.
Whether you use your real estate property as a rental or it was given to you as a gift, you are mandated by law to pay property taxes. Your property tax is calculated by multiplying your property’s assessed value by the sum of the local tax rates in every county.
Keep in mind that the property tax rates in Pennsylvania vary by county and each sector has different rules on collecting property taxes. The local taxing authorities determine the property tax rates depending on their income needs.
In addition, each county in Pennsylvania has its own systems to determine the assessed value of a real estate property. In some counties, the assessed value of a real estate property is equivalent to a percentage of the current market value. While in others, it is the same as the property’s current market value. If you have specific questions about your property taxes or how your real estate property is assessed, make sure you reach out to your local assessment office.
Pennsylvania Tax Laws
In Pennsylvania, taxes are collected at the federal and state levels in various forms. As a resident, it is essential that your taxes are updated to prevent unnecessary penalties and legal consequences.
The last thing you want is a tax collector auditing you for missing out on your tax payments. In addition, you also need to familiarize yourself with the different Pennsylvania tax laws to ensure that you don’t unknowingly commit tax crimes. Some of the tax laws in Pennsylvania that you should learn and explore include:
- Pennsylvania consumer tax laws
- Pennsylvania tax evasion laws
- Pennsylvania income tax laws
- Pennsylvania tax fraud and evasion laws
- Pennsylvania gambling tax laws
Even if you are planning to sell your house for cash or are working with companies that advertise “we buy homes Pennsylvania“, “buy my house Philadelphia“, or “cash home buyers Aston“, you still need to be well-informed on these Pennsylvania tax laws to ensure that your house sale will run smoothly. Keep in mind that the best time to sell your property is not only when the housing market favors the sellers but is also when you are certain that your real estate property is free from any financial and legal complications.
Pennsylvania Property Tax Exemptions
Property taxes can be a significant financial burden for many Pennsylvania homeowners, especially for those who are in the lower end of the income spectrum. To help property owners manage their real estate taxes, the local government of Pennsylvania developed several property tax exemption programs. These tax relief programs are designed to help property owners reduce or completely eliminate their tax bills. Some of the property tax exemption programs in Pennsylvania are:
Pennsylvania Real Estate Tax Exemption for Veterans – This program was designed for eligible Pennsylvanian veterans who have a financial need, are honorably discharged and are 100% disabled.
Property Tax and Rent Rebate Program – This property tax relief program is for Pennsylvanians with disabilities age 18 and older, widowers and widows age 50 and above, and senior citizens. The casino gambling tax revenue collected from the state is utilized to fund this property tax exemption program.
Homestead exemptions – If you are using your Pennsylvania property as your primary residence, you may be eligible for a homestead exemption. This tax exemption program significantly decreases the taxable portion of your real estate property assessed value.
Take note that property tax deductions are totally different from property tax exemptions. A property tax exemption is the full or partial tax amount that you are not required to pay. While a property tax deduction lessens your total tax liability. Knowing the difference between these two tax concepts can further help you in handling your taxes.
How to Find Out If You’re Exempt From Property Taxes
Eligibility criteria for the property tax exemptions vary with each tax relief program. To qualify for these property tax exemptions, you must meet these requirements:
Pennsylvania Real Estate Tax Exemption for Veterans
- Be a resident of the Commonwealth of Pennsylvania
- Received honorable discharge
- Utilizing the real estate property as your primary residence
- Received a 100% service-related permanent disability rating from the United States Department of Veterans Affairs or is paraplegic or blind as a result of the military service
- Served during established wartime
- Recipient of an Armed Forces Expeditionary Medal or a Navy Expeditionary Medal
- Solely owns the real estate property
- Has a yearly income of less than $92,594
If you meet all of these criteria and want to apply for this tax exemption, you need to contact your county’s County Veterans Affairs Director. Alternatively, if you are the unmarried surviving spouse of the veteran who satisfied these requirements, you can continue using this tax exemption provided that you can present proof of financial need.
Property Tax and Rent Rebate Program
- A Pennsylvania resident age 65 and above
- A Pennsylvania resident with a disability age 18 and older
- A widower or widow age 50 and over
- You own and are using the real estate property as your primary residence
If you meet these requirements, make sure that you file the necessary paperwork right away. Being exempted from paying your property taxes can significantly help you better manage your finances, so you can focus on other crucial matters. However, if you are not eligible for these tax exemptions, there are certain strategies you can utilize to reduce your property tax bill. Some of the things you can do include:
- Researching the home values in your neighborhood
- Limiting your home improvement projects
- Double checking your tax bill for inaccuracies
- Walking your home with the assessor
- Giving your assessor access to your property
- Filing a tax appeal
- Getting a second opinion
- Analyzing your property tax card
- Limiting your curb appeal
- Reaching out to your local tax office
If you feel that your property was given an incorrect appraised value, it is important that you secure tangible evidence before filing a complaint. Carefully check all the information provided by the assessor to ensure that there are no errors. You can also request for a copy of the comparable sales information used by the assessor, so that you can compare your property’s valuation to nearby properties. Remember that the assessed value of your real estate property can highly influence your property tax bill, so make sure you take your time to review all the important aspects that can affect your property’s valuation.
Owning a real estate property comes with certain financial obligations. While it is perfectly normal for you to feel overwhelmed with your tax obligations, you need to remember that the local government utilizes these taxes to fund various public services and local projects.
In Pennsylvania, these funds are used to finance local services such as water infrastructure, state law enforcement, courts, public schools, state roads, local levies, general government services, first responders, protective services, recreational services, and other public services. Without this tax revenue, the local state government won’t be able to efficiently carry on with their essential tasks and address the needs of the community.