A Comprehensive Guide to the NYS and NYC Transfer Tax

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NYS and NYS Transfer Tax

What Is The NYS And NYC Transfer Tax?

In New York City, a Real Property Transfer Tax (RPTT) is paid on all transfers of real property and co-op shares over $25,000. It also applies when transferring 50% of the ownership in a corporation that owns property. New York State imposes its own transfer tax on all property transfers over $500. Other states and cities have their own rules which will differ from New York City and New York State. The result of all transfer taxes is higher closing costs for the vast majority of sellers. The New York City transfer tax is a big money maker for the city. In 2015, it was expected to generate $1.5 billion for the city.

Table of Contents:

Who Pays The Transfer Tax?
What Is The History Of The New York City Real Property Transfer Tax?
What Are The New York Transfer Tax Rates?
How Is The Transfer Tax Calculated?
Which Property Transfers Are Exempt From The Tax?
Who Is Exempt From The Transfer Tax?
How Do I File And Pay The Real Estate Transfer Tax?
How Can I Reduce My Closing Costs As A Seller In New York City?

Who Pays The Transfer Tax?

The transfer tax is a tax imposed on the seller (or “grantor”) during the conveyance of real property so it is typically their responsibility to pay. If the seller finds a way to not pay the tax (or just disappears), the responsibility to pay falls on the buyer. One way or another, the tax is going to get paid.

One corner of the market where buyers typically pay the transfer tax is new construction. Unless it is negotiated as part of the purchase, sponsors expect the buyer to pay the transfer tax. In softer markets, that’s more negotiable. Who pays the transfer tax in a sponsor sale can feel like a matter of principle for many participants but it’s just part of the overall negotiation. A dollar paid is a dollar paid regardless of where it goes. However, buyers looking at New York City new construction in should just be aware the “sticker price” is actually 1.825% higher.

What Is The History Of The New York City Real Property Transfer Tax?

The first New York City transfer tax was enacted in 1959. Since then, the transfer tax rate and scope of the tax has grown. In 1959, real property sellers were subject to a 0.5% tax. That has since grown to 1.825% for property in New York City over $500,000 and now includes co-ops. The mansion tax is also technically a NYC transfer tax which was added in 1989 although the buyer must pay that.

What Are The New York Transfer Tax Rates?

In the vast majority of New York City real estate transactions, the seller will be responsible for a transfer tax of 1.4% for properties under $500,000 and 1.825% for properties over $500,000. While the NYS transfer tax is 0.4% regardless of the property’s value, the New York City transfer tax goes from 1% to 1.425% at $500,000. The transfer tax is based on the purchase price of the property.

We’re focusing on “Residential Type 1” or “Residential Type 2” properties for this post which include 1-3 family houses and individual condo and co-op units – basically residential property. For any other properties, the transfer tax rate is even higher – 1.825% if the sale price is under $500,000 and a whopping 3.025% if over $500,000.

How Is The Transfer Tax Calculated?

Below are a few examples of what transfer tax would be due on various types of properties in New York. As long as you’re selling a home or apartment, the biggest variable is the property is located in New York City and therefore subjected to an additional 1% or 1.425% transfer tax.

Property Price NY Transfer Tax NYC Transfer Tax Total Transfer tax
NYC Condo $1,500,000 0.4% or $6,000 1.425% or $21,375 1.825% or $27,375
Westchester House $975,000 0.4% or $3,900 N/A 0.4% or $3,900
NYC Co-op $475,000 0.4% or $1,900 1.0% or $4,750 1.4% or $6,650
NYC Office Building $125,000,000 0.4% or $500,000 2.625% or $3,281,250 3.025% or $3,781,250
 

Which Property Transfers Are Exempt From The Tax?

Unfortunately, most of our readers are subject to the transfer tax. There are only a few exceptions carved out for real, arms-length real estate transactions. New York City’s website outlines the only exceptions to the transfer tax as transactions:

  • To or from the United Nations or any other worldwide, international organization where the US is a member
  • To or from a non-profit organization.
  • To any government body exempt from payment of the tax (see below).
  • Used to secure a debt.
  • From an agent to its principal or vice versa.
  • By an executor as outlined within a will. If a property is sold by an executor though, the transfer tax still applies.
  • Where beneficial ownership remains the same.

This may be getting into the weeds of these tax laws, so if you think you may be able to avoid paying the transfer tax, we highly recommend having a CPA analyze your specific situation. Even in the situations mentioned above, a real property transfer tax return must be filed.

Who Is Exempt From The Transfer Tax?

We have some bad news here too – basically only the government is exempt from the tax. Unless you’re the federal government, New York State or a foreign government, you have to pay. Even for foreign governments, the property must be used exclusively for diplomatic or consular purposes or they may be subject to the transfer tax.

How Do I File And Pay The Real Estate Transfer Tax?

If you are selling a co-op, your attorney will send your transfer tax to the county clerk along with the buyer’s mansion tax (if applicable) and a Form TP-584. If selling real property like a condo or house, the title company will collect the transfer tax from the seller and send it in, along with the buyer’s mansion tax (if applicable) and Form NYS TP-584.

How Can I Reduce My Closing Costs As A Seller In New York City?

When selling in New York and especially New York City, transfer taxes are often the second largest closing cost with only real estate commissions larger. In Yoreevo’s analysis of the purchase and sale of the average Manhattan condo, transaction costs are at least 9.3% of the property’s value. Unfortunately, most pieces of that are not negotiable – transfer taxes, mansion tax, title insurance – and extremely hard to avoid.

The bright side is 6% of that 9.3% is the total broker commission which is always negotiable. By buying and selling with Yoreevo, that 9.3% is knocked down to 5.3%. A seller can utilize Yoreevo’s full service, 1% listing service and save more than the cost of the transfer tax – even in New York City!

This post should not be used as tax advice. Please contact a qualified accountant if you have any questions about your particular situation.

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