Philly property owners could cost the city and school district $11.4 million annually through incorrect tax exemptions, controller says

Thousands of Philadelphia properties are improperly receiving tax relief, and could cost the city and its school district a combined $11.4 million each year, the City Controller’s Office announced Wednesday.

Around 23,000 properties are improperly receiving the tax benefits through the city’s homestead exemption program for the 2025 tax season, Controller Christy Brady said during a news conference about her office’s investigation, which stemmed from a Philadelphia man’s personal research into the issue.

“The homestead exemption program provides property tax relief for many Philadelphians, yet there are many individuals who are taking advantage of it,” Brady said. “These individuals, we believe, are committing real estate tax fraud.”

However, Brady stopped short of calling for a criminal investigation, as some property owners could be committing tax fraud unknowingly, and enforcement of the city’s tax exemptions lies with the revenue department.

The controller’s office report detailed projections for the 2025 fiscal year. Over five years, improper exemptions could cost the city and school district $57 million, the office estimated.

After the release of the report, a city spokesperson said the revenue department established a tax benefit review unit in January and is working on a program to “more accurately identify potential fraud for all assistance programs,” which the department expects to launch in 2025.

According to the controller’s office, zip codes in the Lower Northeast and South Philadelphia saw the highest concentration of illegitimate homestead exemption claims. Brady attributed the prevalence to the higher number of owner-occupied homes there, as opposed to rental properties in neighborhoods like Center City.

The homestead exemption is the city’s most broadly applicable tax relief program. Every owner-occupied home in Philadelphia is eligible if the property receiving the exemption is the homeowner’s primary residence.

This year, the homestead exemption knocks a property’s value down by $100,000, decreasing the amount of taxes a homeowner must pay on the property.

» READ MORE: Property tax bills are going up for many Philadelphians. Here’s how to access new tax relief measures.

The controller’s office began investigating the possible fraud after Philadelphia resident Robert Faulds found through years of his own research on the city’s publicly accessible property website that homeowners seemed to have been filing for multiple exemptions and brought his findings to officials’ attention. Faulds’ research “provided the Controller’s Office with a starting point” for its investigation, the office said in a release.

To carry out its investigation, the controller’s office used the publicly available property information to put residence owners into three categories — finding impropriety in each.

More than 10,000 Philadelphia residences belong to owners with the same name as someone receiving a homestead exemption. Investigators sampled about 500 of those properties, and found frequent instances of one person receiving an exemption on multiple properties. This group cost the city and school district an estimated $6.9 million, according to the report.

A city spokesperson pushed back on Brady’s office’s assertions, noting that “many names are similar” and that two people with the same name may be eligible for the exemption.

Investigators also looked at property owners’ mailing addresses. A sample of the 6,730 instances where a Philadelphia homeowner used a non-Philly mailing address found that about one-third of the property owners were receiving the homestead exemption despite being ineligible because they didn’t live in the city, the report found.

But exceptions may exist there, too, the city spokesperson noted.

“Before granting the homestead exemption, or any tax assistance program, [the revenue department] checks deed records,” the city spokesperson said. “We do not immediately disqualify an applicant who has a different mailing address, as adult children are often managing their parent’s affairs.”

Rental properties owned by businesses made up the third category scrutinized by the office. In a sample of more than 1,300 rental properties owned by businesses, investigators found about one-fourth improperly receiving the exemption, costing the city and school district almost $450,000 in tax revenue.

On Wednesday, Brady said the “vetting process wasn’t there” from the city’s office of property assessment (OPA), which regulates the tax exemptions from property owners.

Brady said her office shared its findings with OPA and the revenue department, along with recommendations to shore up the program against fraud.

Those recommendations include increased property owner verification, a system that flags properties with identical owner names and mailing addresses, recouping lost revenue from property owners, and penalties for improper exemption claims.

Under the current exemption process, a property previously eligible for the tax exemption could become ineligible if, for example, a homeowner purchases another property and rents out the original residence, she said. In that case, it’s up to the property owner to fill out a form on the revenue department’s website and apply to have the exemption removed, leading to the possibility of ineligible homeowners unknowingly receiving the benefit.

“This is a starting point for someone if you know that you are illegitimately taking this,” Brady said. “If that’s not your primary residence, now’s the time to correct this situation.”

Despite the office’s findings of fraud, Brady noted that the tax exemption is underutilized, with only 40% of city homeowners eligible for the exemption using it.