NY State and NYC Transfer Tax- A Comprehensive Guide

By: Jennifer Villalba May 5, 2020

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To talk about taxes in New York State, who holds more authority than one of the founding fathers of America: Benjamin Franklin,

“In this world, nothing can be said to be certain, except death and taxes.”

The quote says it all as there is hardly any way to work around than paying taxes. And property tax is one big cog in this complex machinery of taxes. Property tax in NYS, as alike in the world, is the chief revenue generator for the government. Hence, it makes all the more sense to know the ins and outs of tax to save yourself from trouble later on.

NY State and NYC Transfer Tax:

According to the NYC department of finance, the transfer tax is officially called as Real Property Transfer Tax (RPTT) which applies to all sales, grants, assignments, transfers or surrenders of real property in New York City.

You are also entitled to pay the RPTT for the sale or transfer of at least 50% of ownership in a corporation.

If the value of the property is $499,999 or less, the tax is 1 percent of the purchase price. For properties sold at $500,000 and up, the tax rises to 1.425 percent.

Another tax levied is the NYS tax which is formally known as NYS real estate transfer tax. It is calculated as the .4% of the total amount of the purchase deal and if the transaction increases to more than $3 million, the tax sours up to .65%.

For example:

The seller of a $1 million co-op or condo in New York City would pay $4,000 in New York State transfer taxes and $14,250 (1.425 per cent) in NYC transfer taxes.

Note: both the NYC RPTT and NYS real estate transfer tax is an obligation of a seller except in rare cases include the buyer as well.

 A Glimpse of the Historical Evolution Of Property Tax In NYC:

The first NYC tax was levied in 1959 and since then it has grown higher infractions of the principle tax ratio. Initially, it was held at 0.5% which now hovers at 2.075% for the property over $3 million.

The mansion tax is also technically a transfer tax which was enacted in 1989.

The Mansion Tax:

For buyers, there exists another type of tax called the mansion tax. The New York State levies it on properties valued more than $1 million, statewide.

In NYC, the tax limits at 1% within the bracket of $1-2 million and rises to 1.25% on higher transactions which reach to a total of 3.9 percent for properties sold at $25 million or above.

Note: the mansion tax is an obligation of the buyer.

Who is Exempt From the Tax?

Following are exempted from the tax:

  • Government of the United States
  • Government departments of New York State.
  • Property procured for the diplomatic missions by the foreign governments.

To sum up the debate, only the government is exempt from paying property tax and there is not a sigh of relief for citizens in it.

Who is Obliged to Pay the NY State and NYC Transfer Tax?

The obligation to pay the tax is rested with the seller until and unless negotiation has singed it another way. Another scenario may arise for the buyer, besides the purchase of new development property, if the seller somehow skips the tax and disappear. In that case, the buyer has to pay the tax as tax has to be paid by one or the other way.

How Is The Transfer Tax Calculated?

Getting a good insight into total tax may become cumbersome for a layperson. The information is, therefore, arranged in an orderly manner to get a good hold of the basic information.

 

 

Property

 

 

Price

 

 

NYS Transfer Tax

 

 

NYC Transfer Tax

 

 

Total Transfer Tax

 

 

NYC Condo

 

 

$1,000,000

 

 

0.4% or $4,000

 

 

1.425% or $14,250

 

 

1.825% or $18,250

 

 

NYC Co-op

 

 

$400,000

 

 

0.4% or $1,600

 

 

1.0% or $4,000

 

 

1.4% or $5,600

 

 

How to Offset the Cost of the NYC Transfer Tax:

Working with CEMA purchase might help you to reduce the amount of tax liability. It works in the coordination of a buyer. With the buyer taking over and consolidating your outstanding balance with their new loan. This can reduce your overall transfer tax liability by the amount of your outstanding mortgage.

For the Buyer:

The buyers are liable to pay a transfer tax when opting to buy in a new development. However, the market is really low in the new developments which put pressure on the seller as they already paying the maintenance and other costs. So, by effective negotiation, you may barter the burden on the seller as they are keen to sell a property as soon as possible.

Read Also: what are the tax benefits of owning a home?

For the Seller:

Sell your property on your own. This will save you a commission of an agent which makes up a huge chunk in the closing costs. You may enlist property by yourself against a small fee. Most buyers come with a buyer agent, so sellers may still save up to 3% of the commission.

Transfer taxes are a bunch of taxes levies by both New York State and the city. The taxes vary with the net value of the property and is therefore calculated differently for every unit of property. It is better to know it ‘backwards and forwards’ as there is no other way around than paying each penny of the tax.