Philadelphia Commercial Real Estate Loans: Taxes & Abatement
What a commercial property loan costs in Philadelphia: a 4.578% transfer tax, 1.3998% real estate tax, Use & Occupancy and BIRT, and the 10-year abatement.
| What | Philadelphia |
|---|---|
| Realty transfer tax Cost | 4.578% of the price: 3.578% city (since July 1, 2025) plus 1% state. Buying the company that owns the property can be taxed too. [1] |
| Real estate tax Cost | 1.3998% of assessed value (0.6159% City + 0.7839% School District) for 2026 and 2027; the Office of Property Assessment assesses at 100% of market value. [2] |
| Use & Occupancy Tax Cost | 1.21% of the assessed value of space used for business; the $2,000 annual exemption ended January 1, 2026. [3] |
| BIRT on rental income Cost | Commercial landlords file the Business Income & Receipts Tax: for tax year 2025, 1.410 mills on gross receipts plus 5.71% of net income, with no $100,000 exemption. [4] |
| 10-year abatement Program | For commercial and industrial applications since January 1, 2022: 90% of the added improvement value for 10 years; apply within 60 days of the building permit. [5] |
| Building tune-ups Rule | Non-residential buildings of 50,000 sq ft or more certify high performance or complete a systems tune-up every five years, first due 2026–2029 by size. [6] |
| Sheriff sales Rule | Mortgage-foreclosure sales run online through Bid4Assets; the winner pays 10% by 5 p.m. the next business day and the rest within 15 days. [7] |
| C-PACE Program | Authorized by City Council in 2019 under the state's Act 30 of 2018 and administered by the Philadelphia Energy Authority; private capital providers originate the financing. [8] |
| SBA office Program | SBA Philadelphia District Office, 660 American Ave., Suite 301, King of Prussia, PA 19406. [9] |
Checked 2026-09-29; sources are listed at the end of the page. Pennsylvania-wide rules — foreclosure process, state taxes, C-PACE law — are in the Pennsylvania guide. Your title company and closing attorney confirm the figures for a specific deal.
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A Philadelphia commercial loan uses the same programs as elsewhere — SBA 504, DSCR, bank and bridge loans. What the city changes is one of the highest transfer taxes in the country, a stack of annual taxes a lender reads in the operating statement, and an abatement that changes the math on new construction. Pennsylvania-wide rules — court foreclosure, no mortgage tax, county C-PACE — are in the Pennsylvania guide.
The transfer tax at closing
Philadelphia's realty transfer tax has been 3.578% since July 1, 2025; with the state's 1%, a sale pays 4.578% of the price. Pennsylvania doesn't tax the mortgage, so the loan adds recording fees, not a percentage.
Example: a $2,000,000 building bought with a $1,400,000 loan. Transfer tax: $2,000,000 × 4.578% = $91,560. Mortgage tax: none. Who pays the transfer tax is a term of the contract — at this rate it is worth negotiating line by line.
Buying the company that owns the building doesn't necessarily avoid the tax: when a real estate company holding Philadelphia property changes hands through its ownership interests, the tax can apply, and the company must record a Certificate of Transfer within 30 days. Have counsel review an entity purchase before you price it.
Annual taxes a lender underwrites
The Office of Property Assessment assesses at 100% of market value, and the real estate tax is 1.3998% of that value (0.6159% City, 0.7839% School District) for 2026 and 2027. On top of it, the Use & Occupancy Tax charges 1.21% of the assessed value of space used for business, and since January 1, 2026 there is no $2,000 exemption. A landlord also files the Business Income & Receipts Tax on rent — for tax year 2025, 1.410 mills on gross receipts plus 5.71% of net income.
Example: a building assessed at $2,000,000. Real estate tax: $2,000,000 × 1.3998% = $27,996 a year. If all of it is used for business, Use & Occupancy adds $2,000,000 × 1.21% = $24,200, owed by the owner and business tenants; your leases decide who carries it. Both come out of net operating income, and so out of the loan a given DSCR supports.
The 10-year abatement for construction and renovation
For commercial and industrial applications filed since January 1, 2022, the City abates 90% of the added improvement value for 10 years, on properties that are more than half non-residential. The application is due to the Office of Property Assessment within 60 days of the building permit, and the abatement starts the January after the work is certified complete. A lender sizing a construction loan or its take-out will want the approved abatement in the file.
Building rules and foreclosure
- Benchmarking and tune-ups. Buildings of 50,000 sq ft or more report energy and water use every year, and non-residential ones certify high performance or complete a systems tune-up every five years, first due between 2026 and 2029 by size.
- Sheriff sales. Foreclosures end in an online sheriff sale through Bid4Assets: 10% down by 5 p.m. the next business day and the balance within 15 days. The court's foreclosure diversion program covers owner-occupied homes of up to four units, not commercial property.
Energy upgrades identified in a tune-up can be financed through C-PACE, administered in the city by the Philadelphia Energy Authority, with the existing lender's consent.
Where to start
For an owner-occupied building, SBA loans run through lenders, with the SBA's Philadelphia District Office in King of Prussia. For an investment property, compare a DSCR loan with a bank or permanent loan, and put the transfer tax and the annual taxes above into the commercial mortgage calculator before you make an offer. Start a commercial real estate loan request — one application, compared across our lender network.
Sources: City of Philadelphia (transfer tax 2025-07-28, Real Estate Tax, OPA, Use and Occupancy Tax, BIRT, abatement, BEPP); Philadelphia Real Estate Transfer Tax Regulations; Philadelphia Sheriff's Office; First Judicial District of Pennsylvania; Philadelphia Energy Authority; U.S. Small Business Administration. Checked 2026-09-29.
The bottom line
Philadelphia puts its costs in two places: a heavy transfer tax at closing and several taxes every year after. Build both into the offer — the transfer tax split in the contract, the real estate, U&O and BIRT lines in the operating statement — and if you are building or renovating, file for the abatement within 60 days of the permit.
Commercial loan rates and terms in Philadelphia
Lenders price the property and the borrower, not the city, so Philadelphia loans follow national ranges; what Philadelphia changes is the cost and diligence above. Typical terms as of September 2026:
| Program | Rate | Max LTV / LTC | Term |
|---|---|---|---|
| Bank / credit union | 6.5–8% | 65–75% (80% multifamily) | 5–10 yr |
| SBA 504 | 6.25–7.25% | Up to 90% | 10–25 yr |
| SBA 7(a) | 8.5–11.5% | Up to 90% | Up to 25 yr |
| DSCR | 6.75–8.75% | Up to 75–80% | 5–30 yr |
| CMBS | 7–8% | Up to 75% | 5–10 yr |
| Bridge | 6.25–8.25% | 65–80% | 12–36 mo |
How each range is built: commercial real estate loan rates by type.
Philadelphia commercial real estate loan FAQ
How much is the transfer tax on a commercial property in Philadelphia?
4.578% of the price — the city's 3.578% plus the state's 1% — or $91,560 on a $2,000,000 building. The split between buyer and seller is set in the purchase contract. Transferring the company that owns Philadelphia real estate can also be taxed, with a Certificate of Transfer due within 30 days.
What annual taxes does a Philadelphia commercial property owner pay?
Real estate tax of 1.3998% of the assessed value (assessed at 100% of market value), the 1.21% Use & Occupancy Tax on space used for business, and — for landlords — the Business Income & Receipts Tax on rent: 1.410 mills on gross receipts plus 5.71% of net income for tax year 2025.
Does the 10-year tax abatement still apply to commercial property in Philadelphia?
Yes, reduced: for commercial and industrial applications since January 1, 2022, 90% of the added improvement value is abated for 10 years. Apply to the Office of Property Assessment within 60 days of the building permit.
Sources
- City of Philadelphia — Transfer tax rate
- City of Philadelphia — Real Estate Tax
- City of Philadelphia — Use and Occupancy Tax
- City of Philadelphia — BIRT
- City of Philadelphia — Property tax abatement
- City of Philadelphia — BEPP deadlines
- Philadelphia Sheriff's Office — Conditions of sale
- Philadelphia Energy Authority — Commercial PACE
- U.S. Small Business Administration
Checked 2026-09-29.
Run the numbers
- DSCR Calculator Calculate your Debt Service Coverage Ratio instantly. See if your property qualifies for CRE financing and which loan programs are available to you.
- NOI Calculator Calculate your property's Net Operating Income with a detailed income and expense breakdown. NOI drives your DSCR, cap rate, and property valuation.
- SBA 504 Loan Calculator Estimate your SBA 504 loan structure — see the three-part split (borrower, CDC, bank), monthly payments for each portion, and total project financing.
Keep reading
- Pennsylvania Commercial Real Estate Loans: Transfer Tax & C-PACE What changes for a commercial property loan in Pennsylvania: a 2% transfer tax (4.578% in Philadelphia, 5% in Pittsburgh), court foreclosure and county C-PACE.
- Los Angeles Commercial Real Estate Loans: ULA, Taxes & Retrofits What a commercial property loan costs in Los Angeles: city and county transfer taxes, Measure ULA, the Prop 13 reset and supplemental bill, and retrofit orders.
- New York City Commercial Real Estate Loans: Taxes, LL97 & ICAP What a commercial property loan costs in New York City: 2.8% mortgage tax, 2.625% city transfer tax, Class 4 assessment, LL97 emissions limits and ICAP.