NYC Transfer Tax: Introduction, History, How To Calculate, & More

By: ROS Team

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New Yorkers are very familiar with the process of buying and selling property, but what many don’t know is that there is a tax on these transfers called the NYC Transfer Tax. This tax is paid by the purchaser of the property and, depending on the sale price, can be quite substantial.

In this blog post, we’ll take a look at what the Transfer Tax in NY State is, how it’s calculated, and its history in NYC.

History of Transfer Tax in NYC

The NYC Transfer Tax was first established in 1959 and has been revised several times since then. The rates have fluctuated over time but have generally remained between 1-2% for residential properties and 3-4% for commercial properties.

What is NYC Transfer Tax?

The New York State transfer tax is a tax levied on the transfer of real property located in New York State. The transfer tax is imposed on both sales and leases of real property.

The transfer tax is calculated as a percentage of the purchase price or rental value of the property. Transfer tax rate is 4% for properties sold for more than $500,000.

For properties leased for more than $1,000 per month, the transfer tax rate is 1%. The transfer tax is generally paid by the seller of the property. However, in some cases, the transfer tax may be paid by the buyer or lessee.

NYC Transfer Tax Calculator

The NYC transfer tax is calculated based on the purchase price of the property. The tax rate is 1% for properties worth up to $500,000, 2% for properties worth between $500,000 and $1 million, and 3% for properties worth more than $1 million.

For example, if you purchase a property for $600,000, the transfer tax would be calculated as follows: 1% of $500,000 = $5,000 + 2% of $100,000 = $2,000 = Total transfer tax of $7,000.

NYC Transfer Tax Calculator

How Much is the Transfer Tax in NYC?

According to the New York State Department of Taxation and Finance, the transfer tax is four percent of the purchase price of the property. The tax is imposed on both buyers and sellers, and it is paid at the time of closing.

Who Pays Transfer Tax in NYC?

In New York City, transfer tax is paid by the person transferring property. The transfer tax must be paid at the time of the transfer, and a receipt must be obtained from the city in order to record the transfer. Failure to pay the transfer tax or to obtain a receipt can result in penalties.

NYC Transfer Tax Exemptions

The NYC transfer tax is a tax levied by the city on the sale of real estate. There are a few exceptions to the transfer tax, such as when the property is being transferred to:

  • The state of New York, or instrumentalities, or public corporations.
  • A qualified charitable organization.

 

In addition, there are some exemptions available for certain kinds of properties, such as cooperative apartments and certain types of manufactured homes.

How To Avoid Paying NYC Transfer Tax?

The only way to avoid paying NYC transfer tax is by selling your property through a 1031 exchange. A 1031 exchange allows investors to defer capital gains taxes on investment properties by reinvesting the proceeds from the sale into another qualifying property.

In order to qualify for a 1031 exchange, the property must be held for investment purposes and must be exchanged for another similar property. If you are thinking of selling your investment property in NYC. Be sure to consult with a qualified tax professional to see if a 1031 exchange makes sense for your situation.

Avoid Paying NYC Transfer Tax

How To File and Pay for the Transfer Tax?

The transfer tax is typically paid to the county clerk’s office. The specific office that you need to pay will depend on the county in which the property is located. When you go to pay the transfer tax, you will need to bring a copy of the sales contract and the deed. The deed will have been prepared by the title company and will list both the buyer’s and seller’s names.

Do Buyers Pay Transfer Tax in NYC?

The seller of the property is typically responsible for paying the transfer tax. If the seller does not pay or is exempt from paying the tax, the buyer must.

What is the Purpose of NYC Transfer Tax?

The purpose of the transfer tax is to generate revenue for the state and local governments.

What is Mansion Tax NYC in Transfer Tax?

The State of New York also levies an additional Transfer Tax known as the Mansion Tax NYC. The mansion tax is levied on the sale of residences that are worth $1 million or more. The current mansion tax rate is 2.5%, which means that a home worth $1 million would come with a mansion tax bill of $25,000.

While this may seem like a lot of money, it is important to remember that mansion taxes only apply to a small percentage of homes in NYC. In fact, less than 1% of all homes sold in NYC are subject to the mansion tax.

For most people, Mansion Tax in NY State is not a major concern when buying or selling a home. However, it is something to be aware of if you are considering purchasing a high-end property in NYC.

Final Thoughts

If you are a property owner in New York City, it is important to understand the NYC transfer tax and how to calculate it. The transfer tax applies whenever there is a change in ownership of the real estate. So whether you are buying or selling a property, be sure to factor in this extra cost.