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%.