Philadelphians looking to reassess their residential properties this fall are aware of the impact of recent changes that have left some homeowners paying higher effective tax rates than they did two years ago. This was primarily due to higher appraised values, but also reduced effective tax rates for minority owners. Appraised value. Furthermore, the balance of income received by the city from resident taxes and non-residential property taxes has shifted slightly toward resident tax payers in recent years.
In 2022, the Pew Charitable Trusts examined the city’s real estate taxes in a report called “How Philadelphia Taxes Real Estate.” This tax is the city’s second-largest local tax after the wage tax, and in fiscal year 2024, 14% of the general fund, or $826 million, will go to the city government and $1.08 billion to public schools. is expected to be procured.
There have been several important developments since the publication of the 2022 report. The city conducted its first comprehensive property reassessment since 2022 and announced the results in August 2024. And in June, the City Council approved increasing the homestead exemption from $80,000 to $100,000. This exemption is the city’s largest residential tax subsidy program and reduces the taxable value of all owner-occupied homes. The nominal tax rate of 1.3998% remained unchanged.
The City Council worked with the Mayor’s Administration to establish a tax freeze program for eligible low-income residents in 2024.
These changes have changed the depiction of the 2022 report. for example:
The effective tax rate paid by owners of affordable housing (the taxes they owe divided by the assessed value of their property) has increased on average since 2022. This is because the increase in assessed value exceeded the increase in the homeownership tax credit. . In the 2022 report, the median assessed value for affordable homes was $107,900, but by this year it had risen to $146,800. The share of all property tax obligations in Philadelphia borne by resident taxpayers increased from 71% to 75%, while the share borne by nonresidential properties decreased from 29% to 25%. Nonresidential real estate includes commercial and industrial buildings and vacant land. The commercial sector’s share fell from 24% to 18%, likely as a result of stagnant commercial real estate values due to increased remote work. The city projects property tax revenue for fiscal year 2025 to be $925 million, an increase of 12% compared to fiscal year 2024.
A 2022 report showed that homeownership tax exemptions can have a noticeable impact on how much people pay in property taxes, especially on the lowest-value homes. For example, a property worth $100,000 in 2024 would pay zero taxes to the city, a savings of nearly $1,400 to the homeowner. This exemption also lowers the effective tax rate on higher-value homes, but to a lesser extent. (See Table 1.)
