New York City is famous for its high taxes and even charges an additional fee for the transfer of property. This is known as the NYC Transfer Tax and applies to the transfer of all property and co-op shares valued over a certain dollar amount.
This often results in higher closing costs for sellers on most tractions. So, if you’re thinking of selling a home in New York City, it’s important to factor this tax into your overall budget. Here is everything you need to know about the NYC transfer tax, so you can adequately prepare.
What Property Transfers Are Subject To the NYC Tax?
Any property transfer over $25,000 is subject to the Real Property Transfer Tax (RPTT) – which applies to virtually every private sale within the five boroughs. This tax applies to all sales, grants, assignments, or surrenders of all real estate and includes state or government-owned property that is transferred to a non-government entity.
The tax must also be paid to sell or transfer at least 50% ownership of a business entity such as a corporation, partnership, or trust that owns or leases real estate. It also applies to the sale or transfer of shares in a co-op.
The seller is typically the one responsible for paying the tax, but it will become the buyer’s responsibility if the seller does not pay. Although the vast majority of property transfers will be subject to taxation, there are several exemptions that will be discussed below.
What Are the New York Transfer Tax Rates?
The NYC transfer tax rate is typically between 1% and 1.425% and will vary depending on the property’s value and the transaction’s circumstances. There are two transfer types that the state recognizes for residential transactions – known as the residential one and residential two. These two transfer types encompass most residential real estate transactions, including the sale of 1 to 3 family homes, condominium units, and co-ops.
The NYC transfer tax rate for residential one and two transfers is:
- 1% of the sales prices if the value of the property is less than $500,000
- 1.425% of the sales price if the value of the property is more than $500,000
For all other transactions that do not fall into those categories, the tax rate is:
- 1.425% of the sales price if the value of the property is less than $500,000
- 2.625% of the sales price if the value of the property is more than $500,000
So, for most residential sales it will either anywhere from 1-1.425%, depending on the value of the home. But keep in mind that New York State also charges a separate transfer tax of its own.
How is the NYC Transfer Tax Calculated?
The NYC Transfer Tax is calculated as a percentage of the actual purchase price of the property. So, if you list your property for $1 million but accept an offer of $875,000, you’d pay a transfer tax on the final price.
Here is a look at a few different property transactions along with their NYC transfer tax rates to give you a better idea of how it works:
|Property Type||Location||Purchase Price||NYC Transfer Tax||Total Cost|
|Single Family Home||New Jersey||$400,000||0%||$0|
As you can see, the total cost of the transfer tax varies greatly depending on the location and the type of transfer.
The sellers of the Manhattan condo and Brooklyn duplex would both pay more than twice as much as the Co-op because the properties are more expensive, and they both broke that $500,000 threshold and owe an additional 0.425%.
A single-family home in New Jersey would not pay any New York City transfer taxes because it’s not technically within the five boroughs, even if it’s within the greater metropolitan areas. However, it will be subject to the local tax laws in New Jersey.
The developers of the office building would pay the most because it does not fall within the residential one or two categories and therefore must pay the maximum.
Which Property Transfers are Exempt from the NYC Transfer Tax?
Although the New York transfer tax applies to most transactions, there are a few scenarios where the transfer would be exempt. The official New York City government website lists the following conditions as being exempt from the transfer tax:
- The sale or transfer is to or from a member of the United Nations or any international organization of which the US is a member.
- The sale or transfer is to or from a non-profit organization.
- The sale or transfer is to any government body that is exempt from the tax.
- If the transfer is offered solely to secure a debt or a deed/instrument is given solely to return the security.
- If the property is transferred from an agent to a principal or vice versa.
- If the property is transferred from an executor to another party, as outlined in the terms of a will. (But if the executor decides to sell the property instead, it’s still subject to transfer tax.)
- In the case of a change of identity or organization where the beneficial ownership stays the same.
Who is Exempt from the New York Transfer Tax?
In addition to certain types of property transfers being exempt from the New York State Transfer Tax, there are also certain groups and individuals who are exempt. The state identifies the following groups as being able to avoid paying the RPTT:
- The US Government and its agencies
- The New York State government, including its agencies and political subdivisions
- Any foreign governments, persons acting on behalf of foreign governments, or the head of a diplomatic mission of a foreign government.
For the third exemption to qualify, the transfer must be used exclusively for diplomatic or consular purchases. So, if a foreign government wants to set up a consulate or embassy in New York City, they can do so without paying a transfer tax. But other uses may require the payment of a tax.
In the event that the government entity transfers the property to a non-government entity, they may still be subject to the tax.
How Do I File and Pay the NYC Real Estate Transfer Tax?
To file and pay the NYC Real Estate Transfer Tax, you can use the city’s Automated City Register Information System (ACRIS) to download the necessary documents. There you can start creating your NYC-RPTT packet.
This packet will include:
- Instructions on how to file and submit the tax
- A Real Property Transfer Tax Return
- Registration forms affirming you received a bill for your real estate tax, water, sewer, and smoke detector affidavit of compliance
You will then simply fill out the required forms and submit them to the local government as instructed.
You must file and pay the tax within 30 days of the property transfer. You may request a 30-day extension by submitting a written statement to the New York Department of Finance. But any late payments will be subject to interest and penalties.