August 6, 2020

Moving out of New York City? Beware of New York’s Real Estate Transfer Tax

By Kelly Artz, Manager, Tax & Business Services

Moving out of New York City? Beware of New York’s Real Estate Transfer Tax State & Local Tax

As a result of the COVID-19 pandemic, which reached its height in New York this past April, homeowners are now considering leaving the overpopulated areas of New York City and moving to the neighboring suburbs. If you are thinking about making this move, it is important to consider whether or not you’ll be subject to New York’s Real Estate Transfer Tax, to avoid surprises at closing. The tax was recently changed for property bought and sold in the New York City area after June 30, 2019.

Prior to June 30, 2019

Before the changes made last year, New York’s Real Estate Transfer tax consisted of the following:

Base Tax

  • $2 for each $500, or fractional part thereof, of consideration.
  • Typically paid by the seller. However, if the seller has failed to pay or is exempt from paying the base tax, the buyer has the duty to pay the base tax.
  • Mansion Tax

    • An additional tax of 1% of the sale price applies only to residences where consideration is $1 million or more.
    • Typically paid by the buyer. However, if the buyer has failed to pay or is exempt from paying the mansion tax, the seller has the duty to pay the mansion tax.

    After June 30, 2019

    Last year’s changes to New York’s Real Estate Transfer tax became effective for individuals buying and selling real property after June 30, 2019, in the New York City area. However, a possible exemption from the new changes exists for transactions made in accordance with a binding contract entered into on or before April 1, 2019. The new transfer tax provisions are as follows:

    Additional Base Tax

    • In addition to the base tax described above, a tax of $1.25 for each $500, or fractional part thereof, applies when the consideration for the entire conveyance of residential real property is $3 million or more.
    • For nonresidential real property, the additional base tax applies to conveyances of $2 million or more.
    • Typically paid by the seller.

    Supplemental Mansion Tax

    • In addition to the mansion tax above, there is a supplemental tax on the conveyance of residential real property when the consideration is $2 million or more.
    • Incremental rate ranging from .25% and 2.9% based on the purchase price.

    This creates a maximum mansion tax of 3.9% (1% + 2.9%)

    • Typically paid by the buyer.

    Are Real Estate Transfer Taxes Deductible?

    • Transfer taxes are not deductible as real property taxes for the buyer or the seller.
    • For buyers, transfer taxes are added to the cost basis of the property.
    • For sellers, transfer taxes are considered selling expenses and reduce the amount realized on sale.

    For more information about New York’s Real Estate Transfer tax, or assistance if you are considering moving into or out of New York City, please contact your Marcum tax advisor.

    Related Industry

    Real Estate