Philadelphia and Pennsylvania Realty Transfer Tax in a 1031 Exchange

The rate is 4.578%, and the even split is custom rather than law

The city announced the current rate in July 2025: "The City portion of the transfer tax rate is now 3.578%," and with "the Commonwealth portion of the tax rate staying the same, at 1%, the total tax rate is now 4.578%." The phila.gov notice dates the change to July 1, 2025 and notes the prior city rate of 3.278%.

On allocation the city's realty transfer tax page is direct: "The tax is usually split evenly between the buyer and the seller, but this is not a legal requirement," and the city may collect the full amount from either party. The Commonwealth's realty transfer tax page states the 1% rate and that "both grantor and grantee are held jointly and severally liable for payment of the tax."

Payment is due when the deed is presented for recording or, under the city regulations, within 30 days of the document's acceptance if it is recorded later. Two filings accompany the deed: the Philadelphia Real Estate Transfer Tax Certification and the Pennsylvania Statement of Value. The deed cannot record without them.

There is no like-kind exclusion, and a swap taxes both deeds

Pennsylvania lists its excluded transactions in 61 Pa. Code 91.193: transfers between spouses, parents and children, and siblings; transfers to and from ordinary and living trusts; statutory mergers; conservancies; and others. A section 1031 exchange is not among them. The transfer tax is a tax on the document, and the income tax deferral that section 1031 provides has no bearing on it.

The city's consolidated Real Estate Transfer Tax Regulations answer the swap question in section 410: "If parties exchange realty between themselves, the deeds transferring title to each are all subject to tax," computed on the value of each property conveyed. Trading a Center City building for a King of Prussia building therefore pays city tax on the Philadelphia deed and state plus local tax on the suburban deed.

Hypothetical: a $2,000,000 Philadelphia apartment building sells inside an exchange. The combined tax is $91,560; with the customary split each side pays $45,780. The seller's share is an exchange expense paid from the proceeds without creating boot, as set out on closing costs paid from exchange funds. Run your own numbers with your CPA.

Direct deeding keeps the intermediary out of the chain of title

In a deferred exchange the qualified intermediary is treated for federal purposes as acquiring and transferring the property, but it does not need to take title. Reg. section 1.1031(k)-1(g)(4)(iv) treats the intermediary as acquiring and transferring property if it enters into the agreement for the transfer, which is why standard exchange documents direct the deed from you straight to the buyer, and from the replacement seller straight to you. One deed, one tax, on each leg.

If an intermediary did take title and reconvey, Pennsylvania's straw party rule in 61 Pa. Code 91.170 would tax a single document representing the combined transfers on the full value, so routing through a middle party does not reduce the tax and can add filings. The state's exclusion for transfers between principal and agent, and between an agent and a third party where a direct transfer would be excluded, exists in 91.193(b)(11) but does nothing for a sale to an unrelated buyer, which is taxable however it is routed.

Reverse exchanges deserve closer attention. Section 403 of the city regulations says "the transfer of realty without consideration from an agent to the agent's principal is not subject to tax, if the agent acquired the transferred realty for the exclusive benefit of the principal," with a presumption against the exemption unless the acquiring deed recites the agency. Whether an accommodation titleholder's deed to you fits that exclusion is a question for Pennsylvania counsel before the parking structure is signed; the structure is on the reverse 1031 exchange guide.

Entity transfers are taxed too, under two different thresholds

Selling the LLC instead of the building does not avoid the tax once enough of the ownership moves. Under 61 Pa. Code 91.202, a real estate company becomes an acquired company when a change in ownership, with prior changes in the preceding three years, transfers "90% or more of the total capital and profits ownership interest." The company then owes transfer tax on its Pennsylvania realty. The city's transfer tax page lists "transfers of interest in real estate company (where transfer is 75% or more)" among taxable events.

This matters for partnerships that split before an exchange. Redeeming partners and distributing property, or admitting new members, can cross a threshold without any deed being recorded. The timing problems that such restructurings create for section 1031 itself are on drop-and-swap 1031 strategies.

Family and trust exclusions are narrow and conditioned. A transfer among family members that is reconveyed within a year is taxed as if made by the original grantor, and the transfer to an ordinary trust is excluded only where the beneficiaries would have qualified for a direct exclusion. Moving a property into a single-member LLC ahead of a sale is not among the listed exclusions, so test it with counsel.

What else the Pennsylvania seller should expect at closing

Pennsylvania withholds no income tax at closing on real estate sales, so the full net proceeds after transfer tax can move to the intermediary. The state's 3.07% flat tax, its conformity to section 1031 since 2023 and the local rates outside Philadelphia are covered on 1031 exchange rules in Pennsylvania.

If the replacement property is a DST interest rather than a Pennsylvania deed, you pay no Pennsylvania or Philadelphia transfer tax on the purchase; the trust paid it when it bought the real estate. The other transfer tax regimes that exchangers meet, from New York to Washington State, are on the closing hub.

• Relinquished sale in Philadelphia: 4.578% of value, customarily split; seller's share is an exchange expense.
• Replacement purchase in Philadelphia: same 4.578%, buyer's share paid at recording with the Certification and Statement of Value.
• Replacement purchase elsewhere in Pennsylvania: 1% state plus the local rate for that municipality and school district.
• Entity interests: 90% within three years for the state, 75% on the city's list, taxed as a conveyance of the realty.