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Real Estate Transfer Taxes: A guide for New York City and New York State

According to the New York State Department of Taxation and Finance, “New York State imposes a real estate transfer tax on conveyances of real property or interests therein when the consideration exceeds $500.”

In short, if you sell a property for more than $500, transfer taxes are due.

Who pays the transfer taxes? The buyer or the seller?

Simple answer: the seller.

However, condo buyers in New York City must watch out. In the case of a new development, the sponsor may expect the buyer to pay their transfer tax.

Also, be mindful that in any real estate transaction where the seller neglects to pay the transfer tax, the burden falls to the buyer!

More, if a seller is not a US citizen or resident alien then the seller must pay 15% of the purchase price to the IRS. If the seller neglects to do that or get a FRIPTA (Foreign Investment in Real Property Tax Act) form signed by the seller, then the burden falls upon the buyer to pay these taxes too.

How much are transfer taxes?

If the sales price is below $500,000, then the New York City transfer tax is 1 percent. If the price is above $500,000 then the tax is 1.425 percent. That’s not all. Albany wants in too. There is an additional New York State transfer tax of 0.4 percent on purchases. High rollers have to cough up more. For properties that sell above $3 million, the state transfer tax rises to 0.65 percent.  

Can transfer taxes be negotiated?

The amount of the transfer tax can not be negotiated while who pays the tax most definitely can be negotiated.

In a buyer’s market, a developer will sometimes offer to pay the tax. If they don’t offer, this is on the short list of items to negotiate.

How are transfer taxes paid?

As much as it may hurt to pay this tax, actually doing so couldn’t easier. When you close on a sale, the title company collects the funds and disburses it to the appropriate government agencies. In a recorded Deed, there is a section on the cover page titled Fees and Taxes. In this section, you will see line items for the Filing fee, the NYC Real Property Transfer Tax, and the NYS Real Estate Transfer Tax. In each line, the amounts paid will be shown.

Are there any exceptions?

There are some cases where property transfers are exempt from the tax. These include transfers to or from the United Nations or another international organization of which the U.S. is a member.

Exchanges involving non-profit organizations, those from the federal or New York State government or by an executor of a will are also exempt.

Additionally, transfers that are ‘mere changes in identity,’ for example from one related person or company to another, may also be exempt.

(Featured image courtesy of Corcoran)