Homeowners are saving a lot of money on their property transfers, and it all comes down to three letters: FIP
What is a FIP?
In the City of Philadelphia, in accordance with Bill #070541 amending the Realty Transfer Tax section of the Philadelphia Code, you are considered an FIP (Financially Interdependent Person) if you are “Persons who live together as a single household and who, for at least six months, have agreed to share the common necessities of life and to be responsible for each other’s common welfare.”
FIP status is blind to sexual orientation and familial relationships also may qualify such as aunt, uncle, and nephew. The Amendment refers to “the relationship between or among individuals responsible to one another for the common necessities of life (i.e., food, clothing, shelter, etc).”
The Benefits of FIP Status
How might you benefit? If you and your co-FIP own real estate together and one of you no longer wishes to own the property, the Deed conveying his/her interest to you will not be subject to the City’s portion of the realty transfer tax as it would have been prior to the Amendment. The transfer tax in Philadelphia is 3% and on transfers for nominal consideration, the tax is based upon the Fair Market Value of the property. The tax is prorated in accordance with the percentage of interest being transferred.
This exemption also applies to adding a Financially Interdependent Person to your Deed.
Registered Life Partners are not required to prove their financial interdependence.
What to Expect
Your Deed transfer could be subject to audit by the Department of Revenue. Your status will be verified by your submitting documentation including, but not limited to, copies of statements of joint bank accounts, joint utility bills, and proof that you have equally shared in housing expenses.
To protect against the misuse of this benefit, the immediate subsequent transfer of the property within a certain time frame may cause the Department of Revenue to “look back” and tax the previous exempt transaction.
Important to Note
The Commonwealth of Pennsylvania does not recognize an exemption for property transfers between Financially Interdependent Persons; therefore, the transfer will be subject to the 1% Realty Transfer Tax imposed by the Commonwealth of Pennsylvania. The tax is prorated in accordance with the percentage of interest being conveyed.
As in the past, there is no City or State transfer tax assessed on transactions between husband and wife and parent and child.
Where to Turn
There is no doubt that the FIP exemption will benefit many residents and while the transfer is not complex, certain procedures must be followed including the signing and filing of multiple Affidavits. When your real estate transaction requires title insurance and you believe you might be eligible for the FIP exemption, be sure to select a title insurance professional experienced in these transfers. For Deed transfers not requiring title insurance, contact a real estate attorney.
Visit Phila.gov for Bill No. 070541 for details.
{ 0 comments }
