Taxes related to carrying property in Philadelphia
Hello all, thanks for the help in advance. I'm trying to compute future property tax for Philadelphia properties. I've researched the internet to include the Philadelphia tax site. My research turns up two things that I'm trying to confirm: A) Philadelphia city and Philadelphia county are the same thing for tax purposes and B) There are no Philadelphia county property taxes. The taxes that I'm currently accounting for are as follows:
1. Real Estate Transfer Tax - 3.1% plus 1% for the State of PA (Jan '17)
2. City Tax - 0.006317%
3. Schools Tax - 0.007681%
-Are there any other taxes related to the purchase or sale of a property in the City of Philadelphia?
-If I rent a property to a tenant, do I pay Wage Tax AND Use and Occupancy Tax AND Earnings Tax?
Thanks,
Matt
When a property is bought/sold in Philadelphia, there is a 4% transfer tax (1% state & 3% local). Typically this is split 50/50 between buyer and seller but it can be split in any way that is agreed upon by both parties.
Holding costs are an annual property tax of 1.4% of the assessed value which you can look up here: property.phila.gov.
Use & Occupancy tax is only assessed on commercial properties so you don't have to worry about that for a residential rental.
Wage tax is only for W-2 income so you don't pay that for residential rental income.
You will need to pay NPT and BIRT, which you file online at the end of the year based on your rental profits, you can learn about those here:
http://www.phila.gov/Revenue/businesses/taxes/Page...
http://www.phila.gov/Revenue/businesses/taxes/Page...
Ethan,
Thanks for the quick reply! Great links...Man Philly gets you coming and going. A couple follow-up questions:
-If the city considers residential rental activity a business activity, does that mean you're required to hold a Commercial Activities License or is a Social Security Number enough?
-Although NPT and BIRT are taxes on business activity, can you deduct them from personal state and federal taxes if you're operating your "business" under your personal name and not as an LLC/ corporation, or partnership?
-In the above situation, would you be considered a sole proprietor by default?
Thanks,
Matt
Yes, in Philadelphia you'll need a Commercial Activity License (free), and a housing inspection (rental) license ($50/unit/year).
https://business.phila.gov/commercial-activity-lic...
You'll have to discuss with your CPA/tax preparer your specific tax situation. But in general, any expense that is directly related to your rental business can be deducted from your federal and state returns, which would include local taxes. You would just report the rental activity on a Schedule E.
I believe the license is a one-time fee. Don't think City provides anything 'free' except the suitability cert required for rentals.
Also if the property is a non-owner occupied duplex or above, requires a trash pickup fee annually.. Believe it's a couple hundred dollars/per year.
Solid information all around! Thank you all...
Can you apply depreciation against these taxes? If not,
Hypothetically if you grossed 10k in rental income, what is a ballpark figure you would have to pay in taxes?
thank you in advance.
@Matt Hummer Very thorough breakdown, I have a minute detail but in this business, every penny counts. Full transfer tax is 4.28% and split is 2.12%, from what I've seen in the off-market sector it's actually very common for the buyer to pay both sides of transfer tax (Full)